Show how the following events should be reflected in the accounts at 31 December 2015 and describe audit procedures you would carry out to verify them:

1. Company D is in dispute with a supplier as to the quality of goods supplied and has provided for the amount it believes to be correct (100.000). The supplier has sued for the full amount invoiced (150.000) but on 11 March 2016 the company and supplier agree the liability out of court at 120.000.
2. Company E had prepared draft financial statements at 30 November 2015, showing an acid test ratio of 0.85 to 1 (The normal acid test ratio in its industry is 1 to 1). Shortly before 31 December 2015, the company sold trade investment for 450.000, incurring a loss of 100.000 and this had the effect of increasing the acid test ratio to 0.98 to 1. On 16 January 2016, the company repurchased the trade investmen for 500.000