Question
The directors of KMSD, a limited liability company, are reviewing the companys draft financial statements for the year ended 30 June 2015. The following material
The directors of KMSD, a limited liability company, are reviewing the companys draft financial statements for the year ended 30 June 2015. The following material matters are under discussion: a. After the balance sheet date one of the companys factories was seriously damaged by fire. Insurance will only cover part of the loss suffered. The companys going concern status is not affected. b. One of the companys buildings was revalued during the year. The directors are uncertain as to how the revaluation surplus should be included in the financial statements. The surplus has been separately disclosed as an item in the draft income statement. c. The draft financial statements for the entity for the year ended 30 June 2015 have been prepared. A final review of the draft reveals an overvaluation of the closing inventory of GHS 200,000 at 30 June 2014. Further investigation shows that there was an overvaluation at 30 June 2013 of GHS 120,000 Explain how each of these matters should be dealt with in the financial statements for the year ended 30 June 2015, stating in each case the relevant accounting standard.
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