Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Lion Pte Ltd is finalising its financial statements for the year ended 31 December 20X1. The date of authorisation of financial statements for issue was

Lion Pte Ltd is finalising its financial statements for the year ended 31 December 20X1. The date of authorisation of financial statements for issue was 14 March 20X2 and the annual general meeting is scheduled on 23 April 20X2. The following events occurred as follows:

(a) Inventory held by Lion Pte Ltd was recorded at its cost of $1,104,000 at 31 December 20X1 in the statement of financial position. The whole inventory was damaged by flood water in December 20X1. The entity sold 80% of the inventory for $616,000 on 7 February 20X2.

(b) On 9 August 20X1, the company invested $3 million in a promising high technology company Tiger Ltd. The value of the investment rose to $3.5 million as at 31 December 20X1. However, on 14 January 20X2, a major earthquake struck the region where the factory of Tiger was located, causing its share price to plummet. The value of the investment dropped to $1.5 million the next day.

Illustrate the appropriate accounting treatment of the events in the financial statements of Lion Pte Ltd for the year ended 31 December 20X1. Prepare the necessary journal entries, if necessary.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Acca Paper 3.1 Audit And Assurance

Authors: N/a

1st Edition

075172680X, 978-0751726800

More Books

Students also viewed these Accounting questions