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Telecel Company is preparing its financial statements for the year ended 30 September 2015. The following matters are all outstanding at the year end. Telecel

image text in transcribed Telecel Company is preparing its financial statements for the year ended 30 September 2015. The following matters are all outstanding at the year end. Telecel is facing litigation for damages from a customer for the supply of faulty goods on 1 September 2015. The claim, which is for $500,000, was received on 15 October 2015 . Telecel's legal advisors consider that Telecel is liable and that it is likely that this claim will succeed. On 25 October 2015 Telecel sent a counter-claim to its suppliers for \$ 400,000. Telecel's legal advisors are unsure whether or not this claim will succeed. Telecel's sales director, who was dismissed on 15 September, has lodged a claim for $100,000 for unfair dismissal. Telecel's legal advisors believe that there is no case to answer and therefore think it is unlikely that this claim will succeed. Although Telecel has no legal obligation to do so, it has habitually operated a policy of allowing customers to return goods within 28 days, even where those goods are not faulty. Telecel estimates that such returns usually amount to 1% of sales. Sales in September 2015 were \$ 400,000 . By the end of October 2015, prior to the drafting of the financial statements, goods sold in September for $3,500 had been returned. On 15 September 2015 Telecel announced in the press that it is to close one of its divisions in January 2016. A detailed closure plan is in place and the costs of closure are reliably estimated at $300,000, including $50,000 for staff relocation. Required State, with reasons, how the above should be treated in Telecel's financial statements for the year ended 30 September 2015

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