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QUESTION TWO [ 4 0 ] Cute Cakes Limited consists of a chain of cake outlets that bakes and sells cakes to the public. The

QUESTION TWO
[40]
Cute Cakes Limited consists of a chain of cake outlets that bakes and sells cakes to the public.
The financial director is finalising the preparation of the financial statements for the year ended 31 December 2023 and has identified the following issues for discussion in a meeting with the company's IFRS consultant:
a) Costs of R50000 estimated to be incurred for relocating a staff member, A.Chef, from the company's head office in Durban to Cape Town to set up shop and manage a new store. The staff member will physically relocate during July 2024.
b) Long-service leave, estimated to be R150000, owing to employees in respect of past services.
c) Provision of R75000 for the replacement of a machine. The replacement is required every four years and the machine was four years old as at 31 December 2023.
d) Damages awarded against Cute Cakes Limited resulting from a court case decided on 22 December 2023. The judge has announced that the amount of damages will be set at a future date, expected to be in March 2024. Cute Cakes Limited has received advice from its lawyers that the amount of the damages could be anything between R50000 and R15 million.
e) An amount of R275000 owing to Sugar works Limited for raw materials provided in December 2023.
The company's financial statements are authorised for issue on 24 February 2024.
Required
Discuss how each of the above issues should be recognised and disclosed in the financial statements of Cute Cakes Limited at 31 December 2023 with reference to International Financial Reporting Standards.
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