QUESTION 4 PART A Consider the following situations Situation 1 (10 marks) Holiday Out is a company operating in the travel and tours industry. Due to the Covid pandemic placing many restrictions on travel, Holiday Out suffered immense losses during the current year ended 31 March 2022. They decided to discontinue their operations with effect from 1 May 2022, however, Holiday Out's financial statements for the year ended 31 March 2022 were prepared using the same basis as last year when they were a profitable company. Situation 2 The financial results of Fresh Farmers fluctuate erratically from year to year. The directors of Fresh Farmers therefore decided to create certain provisions in years of higher profits and adjust those provisions in the years of lesser profits to present profits at a consistent level from year to year. PART B Consider the following general concepts relating to financial information: Use of the same cost formula for stock valuation which was used in the previous period. Users of the financial statements need the most up-to-date information as soon as possible after the financial year-end so that the information is current and relevant for the economic decisions made by the users. Information that assists in estimating net future cash flows and when in the future the cash flows are likely to be produced. It can influence the decisions made by users. The cost of small calculators may be charged to expenses instead of being capitalized HFAC130-1-Jul-Dec2022 FA1 GC V2 28072022 REQUIRED: a) Identify and explain the accounting concepts/principles relevant to each of the above two situations mentioned in PART A. (1x2=2marks) b) State whether you agree with how the financial statements are presented in each of the two situations mentioned in PART A and if not, suggest what adjustment should be made to the financial statements. (2x2 = 4 marks) c) Identify what qualitative characteristic accounting concept is being referred to in each of the letters (a) to (d) in PART B (4 marks)