HowardLtdis amanufacturing company thatsellsGym equipmentthe audit ofHoward Ltdfor the year ended 30 June 20X0, the auditor lists the following items considered material for review by the engagement manager.

1. A $26,000 sale on 14 July 20X0forGym equipmentwas included in the inventory at a cost of $35,000.

2. Bonds were issued on 16 August 20X0in the amount of $2,000,000.

3. Machinewas purchased on 31 July 20X0 for the amount of $150,000.

4. A major customer filed for bankruptcy on 15 June 20X0.

5. A legal action in the amount of $150 000 was settled on 6 August 20X0 and is listed as a contingent liability on the financial statements.

6. A legal action was filed againstHoward Ltdfor an injury to a customer's employee using a tool sold to them byHoward Ltd.

7.Howardhas had discussions with a larger tool company for possible merger or sale.

Required

a.Which of the above items are most likely to be considered subsequent events?(6marks)

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b.What is the appropriate treatment of each of these seven items on 30 June 20X2 financial statements assuming each one is material?(7 marks)

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c.Distinguish between independence in fact and independence in appearance. State three activities that may not affect independence in fact but are likely to affect independence in appearance.(6marks)