It is now 26 June 2020 and as the financial controller of Cookie SwirlC Ltd (a public listed company) you are in the process of finalising the financial statements of Cookie Swirlc Ltd for the financial year ended 31 March 2020. Cookie Swirlc Ltd has hired three assistant accountants recently to assist you in coping with the year-end close and accounting workload. The scenarios below relate to specific events which may have an impact on the Company reporting. All amounts in the information below are material. The tax rate is 30%. (i) At 31 March 2020, Cookie Swirl Ltd analysed the internal and external sources of information that would indicate deterioration in the worth of its assets. It determined that there were indications of impairment for a cash-generating unit (CGU). Cookie Swirlc Ltd reported the following information of the cash generating unit in its statement of financial position at 31 March 2020 and calculated the recoverable amount of this CGU to be $900,000: Equipment $630 000 Accumulated depreciation - equipment (200 000) Copyrights 310 000 Accumulated amortisation - copyrights (5000) Goodwill 50 000 Land and buildings 165 000 Total non-current assets 950 000 Cash and cash equivalents 100 000 Inventories 120 000 Total current assets 220 000 Total assets $1 170 000 Provision for warranty 280 000 Net assets $890 000 (7 marks) The following information became available to you and your assistant accountants while accounting for accounts receivable. The credit balance of the Allowance for Doubtful Debts account balance is $5,300 before any adjustments. Customer Balance 181-365 Over 1 year Ariel Ltd Blade Ltd Coxon Ltd J. Milas Burke Ltd S. Fuma E. Warren T. York Ltd Total 27,500 5,000 222,500 91,300 27,500 13,200 33,000 5,950 425,950 Ageing of Trade Receivable As at 31 March 2020 Number of days overdue Not yet due 1-30 31-60 61-90 91-180 27,500 5,000 8,000 71,500 71,500 71,500 36,300 55,000 22,000 5,500 13,200 11,000 22,000 5,950 40,950 107,800 71,500 27,500 13,200 99,000 1% 66,000 15% Loss given default rate 0% 5% 10% 25% 50% On 22 April 2020, sales return notes raised for goods returned to Cookie Swirlc Ltd from Burke Ltd in March 2020 were recorded as April 2020 sales returns. The goods returned amounted to $20,000 plus GST. Burke Ltd was later declared bankrupt at the end of May 2020 and also included in trade receivables of Cookie Swirlc Ltd was an amount of $5,500 which was due from Burke Ltd as at year end. GST rate is 10%. Cookie Swirlc Ltd is registered for GST, uses the allowance method to account for bad debts and it records its inventories using the periodical inventory system method. (11 marks) Required: With reference to applicable and relevant accounting standards (AASBs/IFRSs/IASs) and accounting principles, (i) Classify the events into adjusting or non-adjusting events. (ii) Explain and justify on the appropriate accounting treatment(s); and Prepare the necessary notes to the financial statements or adjusting entries needed in relation to the above events. It is now 26 June 2020 and as the financial controller of Cookie SwirlC Ltd (a public listed company) you are in the process of finalising the financial statements of Cookie Swirlc Ltd for the financial year ended 31 March 2020. Cookie Swirlc Ltd has hired three assistant accountants recently to assist you in coping with the year-end close and accounting workload. The scenarios below relate to specific events which may have an impact on the Company reporting. All amounts in the information below are material. The tax rate is 30%. (i) At 31 March 2020, Cookie Swirl Ltd analysed the internal and external sources of information that would indicate deterioration in the worth of its assets. It determined that there were indications of impairment for a cash-generating unit (CGU). Cookie Swirlc Ltd reported the following information of the cash generating unit in its statement of financial position at 31 March 2020 and calculated the recoverable amount of this CGU to be $900,000: Equipment $630 000 Accumulated depreciation - equipment (200 000) Copyrights 310 000 Accumulated amortisation - copyrights (5000) Goodwill 50 000 Land and buildings 165 000 Total non-current assets 950 000 Cash and cash equivalents 100 000 Inventories 120 000 Total current assets 220 000 Total assets $1 170 000 Provision for warranty 280 000 Net assets $890 000 (7 marks) The following information became available to you and your assistant accountants while accounting for accounts receivable. The credit balance of the Allowance for Doubtful Debts account balance is $5,300 before any adjustments. Customer Balance 181-365 Over 1 year Ariel Ltd Blade Ltd Coxon Ltd J. Milas Burke Ltd S. Fuma E. Warren T. York Ltd Total 27,500 5,000 222,500 91,300 27,500 13,200 33,000 5,950 425,950 Ageing of Trade Receivable As at 31 March 2020 Number of days overdue Not yet due 1-30 31-60 61-90 91-180 27,500 5,000 8,000 71,500 71,500 71,500 36,300 55,000 22,000 5,500 13,200 11,000 22,000 5,950 40,950 107,800 71,500 27,500 13,200 99,000 1% 66,000 15% Loss given default rate 0% 5% 10% 25% 50% On 22 April 2020, sales return notes raised for goods returned to Cookie Swirlc Ltd from Burke Ltd in March 2020 were recorded as April 2020 sales returns. The goods returned amounted to $20,000 plus GST. Burke Ltd was later declared bankrupt at the end of May 2020 and also included in trade receivables of Cookie Swirlc Ltd was an amount of $5,500 which was due from Burke Ltd as at year end. GST rate is 10%. Cookie Swirlc Ltd is registered for GST, uses the allowance method to account for bad debts and it records its inventories using the periodical inventory system method. (11 marks) Required: With reference to applicable and relevant accounting standards (AASBs/IFRSs/IASs) and accounting principles, (i) Classify the events into adjusting or non-adjusting events. (ii) Explain and justify on the appropriate accounting treatment(s); and Prepare the necessary notes to the financial statements or adjusting entries needed in relation to the above events
