QUESTION 2 - JANUARY 2019 (Questiea 4 Amended) Aklos ple propoes its financial stantements to 31 December each ycar, Biefore the financial staterments foe the year ended 31 Deceniber 2018 can be finalised, a number of eutsandine isues noed to be resolved Ixuse 1: Closine inventory of Arklow ple in 31 December 2018 inclades 100 ifems carried at sos $5,000 ench. New safety regulations were anounced on 5 Aprit 2019 with immetione repulatioes. As a result, the net realisalte value of the inventiory is rely 64,500 each. 4 Marks Isue 7: lepal astion apainat. Arklow ple alleging that work coenploted with the icrms of the contract. The dinctions of Arklow ple lepal advisoss exintate that the company has an sobs shance of necesefilly defenling the elaim. If Otis Limiled is successful, perialies and legal foes are exproted io amount to f300,000, If Arklow ple wims the cine, non-recoverable lepal foes of (60,000 are likely is have been incurned. The directoen of Anlow fle are proposing to omil reference to the lezal action in the finatcial statentsonts for the year endod 31 Decepeber 2018 as the writ was not issupd ustill January 2019. 4 Mtarks twae 3: A cussomer, Bedfont Limined, which oued Adolow ple Jasuary 2019. It is expected teat oely 20 pence in the pound will be reeperered. A farther tso.000 of credit sales had been made to Hodfoed Limind durine the peried 1-5 January 2019 5 Mark: Ixase 4: On 6 fanuary 2019 . Arllow ple advised ins legal advions to ecemence an action arainst its major supplier claiming danuges of t$00,000 in respect of loses sustained as a sesuli of the supply of faulty poodh daring 2018 . Acconling to the Irgal mivice, Artlow ple has a very good chonce of winning the case 5 Miarks Issee 5: Arklow ple expects to incur maling lowsen during the year ended 91 Decomber 2019. Consegocntly, the compony's finanee directiof believes that it would be prodent to recopnise a provision for 065.000 in the firancial stateneents for the year eaded 31 December 2018 in teapect of the amticipated trading loses. Restructuring plans are at present being formuland and Arklow ple's finance diecelor believes than those will result in expenditure amouting to 800000 in 2019. An analysis of the expendente arising from the dection to restructuee is as follows: Waile a formal plan bat bove drawn ip in relation so the restructuring, an announcernent has not yet boen made to those to the reatrocharing. The finance diector is still unsure as to bow to deal with this issuc in the francial ansements of Arklow ple for the ycar ended 3 ! Doccmber 2048. 7 Marks Requirement Prepare a memoranlum in the directan of Arklow ple which axplains bow cach of the above auses should be accountod for in the fiancial stakements of Arklow ple for the year ended 31 Docomber 2018 , showing clourly any accouting adjestments troquital Question 2 (Arklow Limited: Issue 2) At 31 December 2018. Arklow Limited should make a provision for: 360,000 60,000 Nothing - no provision required 300,000 Question 7 1 pts Question 2 (Arklow Limited: Issue 3) At 31 December 2018, Arklow should: Reduce receivables by 125.000 Reduce receivables by f48,000 Reduce receivables by 192,000 Do nothing but then adjust the 2019 financial statements Disclose as a contingent gain Make no adjustment Adjust the inventory by 500 Disclose as a contingent liability QUESTION 2 - JANUARY 2019 (Questiea 4 Amended) Aklos ple propoes its financial stantements to 31 December each ycar, Biefore the financial staterments foe the year ended 31 Deceniber 2018 can be finalised, a number of eutsandine isues noed to be resolved Ixuse 1: Closine inventory of Arklow ple in 31 December 2018 inclades 100 ifems carried at sos $5,000 ench. New safety regulations were anounced on 5 Aprit 2019 with immetione repulatioes. As a result, the net realisalte value of the inventiory is rely 64,500 each. 4 Marks Isue 7: lepal astion apainat. Arklow ple alleging that work coenploted with the icrms of the contract. The dinctions of Arklow ple lepal advisoss exintate that the company has an sobs shance of necesefilly defenling the elaim. If Otis Limiled is successful, perialies and legal foes are exproted io amount to f300,000, If Arklow ple wims the cine, non-recoverable lepal foes of (60,000 are likely is have been incurned. The directoen of Anlow fle are proposing to omil reference to the lezal action in the finatcial statentsonts for the year endod 31 Decepeber 2018 as the writ was not issupd ustill January 2019. 4 Mtarks twae 3: A cussomer, Bedfont Limined, which oued Adolow ple Jasuary 2019. It is expected teat oely 20 pence in the pound will be reeperered. A farther tso.000 of credit sales had been made to Hodfoed Limind durine the peried 1-5 January 2019 5 Mark: Ixase 4: On 6 fanuary 2019 . Arllow ple advised ins legal advions to ecemence an action arainst its major supplier claiming danuges of t$00,000 in respect of loses sustained as a sesuli of the supply of faulty poodh daring 2018 . Acconling to the Irgal mivice, Artlow ple has a very good chonce of winning the case 5 Miarks Issee 5: Arklow ple expects to incur maling lowsen during the year ended 91 Decomber 2019. Consegocntly, the compony's finanee directiof believes that it would be prodent to recopnise a provision for 065.000 in the firancial stateneents for the year eaded 31 December 2018 in teapect of the amticipated trading loses. Restructuring plans are at present being formuland and Arklow ple's finance diecelor believes than those will result in expenditure amouting to 800000 in 2019. An analysis of the expendente arising from the dection to restructuee is as follows: Waile a formal plan bat bove drawn ip in relation so the restructuring, an announcernent has not yet boen made to those to the reatrocharing. The finance diector is still unsure as to bow to deal with this issuc in the francial ansements of Arklow ple for the ycar ended 3 ! Doccmber 2048. 7 Marks Requirement Prepare a memoranlum in the directan of Arklow ple which axplains bow cach of the above auses should be accountod for in the fiancial stakements of Arklow ple for the year ended 31 Docomber 2018 , showing clourly any accouting adjestments troquital Question 2 (Arklow Limited: Issue 2) At 31 December 2018. Arklow Limited should make a provision for: 360,000 60,000 Nothing - no provision required 300,000 Question 7 1 pts Question 2 (Arklow Limited: Issue 3) At 31 December 2018, Arklow should: Reduce receivables by 125.000 Reduce receivables by f48,000 Reduce receivables by 192,000 Do nothing but then adjust the 2019 financial statements Disclose as a contingent gain Make no adjustment Adjust the inventory by 500 Disclose as a contingent liability
