Question 1:

TDM Ltd is a manufacturing business at Mudjimba on the Sunshine Coast. You are the accountant for the company and the following items/issues relate to the financial year ending 30^th June, 2016:

1.Photographs of the company's founders and original buildings, which are of great sentimental and historical value only.

2.TDM Ltd is being sued for negligence by Zero Ltd and the legal advice is that it is likely the company will lose the case in court.

3.TDM Ltd is being sued for negligence by Badger Ltd and the legal advice is that it is likely the company will win the case in court.

4.Obsolete plant and equipment is now (as at 30 June 2016) retired from use by the company.

5.TDM Ltd has received a donation of $20,000.

Required:

Explain how TDM Ltd should account for each of the above items. You must justify your answer by reference to the AASB Conceptual Framework's definitions and recognition criteria for assets, liabilities, income and/or expenses as applicable. You must also state which General Ledger accounts are to be debited and credited.