JANUARY 2019. QUESTIONS Urban plc, a company that prepares its a company that prepares its financial statements to 31 December cach year involved in the construction and repair of city centre student accommod e r of inancial statements for the year ended 31 December 2018 can be finalised, outstanding issues need to be resolved. outstanding icments for them and repair of ancial staten need to be resor ended 31 Decennice stude ntre student accommodation. Before the succesusly and Urbcontract. The cotember 2018 had noction againse Urbi Issue 1: In early January 2019, a customer com y, a customer commenced legal action against Urban plc alleging construction work completed in September 2018 had not been carried out in terms of the contract. The directors of Urban plc intend to defend the allegation Borously and Urban ple's legal adviseurs estimate that the company has an 75% chance Successfully defending the claim. If the customer is successful, penalties and legal fees are expected to amount to 1.500.000. If Urban plc wins the case, non-recoverable legal fees of U will have been incurred. The directors of Urban ple are proposing to omit reierende to the legal action in the financial statements for the year ended 31 December 2018 as the w was not issued until January 2019. 65,000 will amount to 1,500,000 the customer is succes company has an 4 Marks Issue 2: Urban plc was informed on 6 January 2019 that one of its major customers, Unibed Limited, had gone into liquidation. The liquidator indicated that no payments would be made to unsecured creditors. The amount owed by Unibed Limited to Urban ple on 6 January 2019 amounted to E100,000, of which 60,000 related to work completed on 21 December 2018 and 40,000 to work commenced and completed during the first week of January 2019. 6 Marks Issue 3: During 2018, there was unrest amongst Urban ple's construction workers following changes to their terms and conditions of employment, with the directors of Urban ple seeking to make 20% of the workforce redundant. On 6 January 2019, following protracted negotiations, it was agreed that 12% of the workforce would be made redundant at a cost of 400,000. 4 Marks Issue 4: As the profits of Urban ple for the year ended 31 December 2018 exceeded expectations, the directors wish to reward the ordinary shareholders for their commitment to the company. At a meeting of the Board of Directors on 5 January 2019 it was decided that a dividend of 500,000 be paid immediately to the ordinary shareholders and accounted for in the financial statements for the year ended 31 December 2018. 5 Marks Issue 5: During 2018, Urban plc purchased freehold land that is currently stated at its cost of 1,000,000 in the financial statements for the year ended 31 December 2018. The directors do not wish to depreciate the land in 2018 but are willing to do so in future years. 4 Marks