Question
Fresh Forest Ltd bought a machine on 30 June 2020 for N$ 400 000. A loan was entered into with First Impression Bank Ltd for
Fresh Forest Ltd bought a machine on 30 June 2020 for N$ 400 000. A loan was entered into with First Impression Bank Ltd for financing the machine. On 31 December 2020 (year-end), the outstanding amount on the loan was N$ 300 000. Depreciation of N$ 40 000 has been written off to date which brings the carrying value to N$ 360 000.
In the statement of financial position the machine is measured at N$ 60 000 and no loan is disclosed. There is no further disclosure in the statements about the event.
Required: Explain to the management based on the Conceptual Framework, why the above mentioned disclosure is not correct. (7 Marks)
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