Use the following information to answer question 1 and 2:

Air Fry Ltd is a manufacturer of specialised pots that reduces the time it takes to cook a meal, resulting in electricity consumption also being lower. During March 2022, however, a competitor introduced a better product on the market, thereby reducing the demand for Air Frys products. Air Fry Ltd immediately decreased their selling price from R500 per pot to R300 per pot to try and compensate for this. This selling price reduction, however, did not have any effect on the going concern of the company. On 28 February 2022, 2 000 pots were on hands. The previous accountant was not certain whether this inventory should be written down to the selling price of R300 per pot, as it is lower than the cost of R350 per pot. The financial statements were authorised for issue during April 2022.

1.Which one of the following statements are correct based on the information provided above? A.Since the event occurred between the reporting date and the date the financial statements were authorised for issue, this is an adjusting event.

B.Air Fry Ltd will not have to adjust their financial statements as this event occurred after the reporting date and no disclosure thereof is required.

C.The event is indicative of circumstances that occurred during the financial period and thus this represents an adjusting event.

D.Air Fry Ltd will not have to adjust their financial statements as this event occurred after the reporting date, however, a disclosure of the nature of the event is required

2.If it is assumed that Air Fry Ltd has to adjust their financial statements, the details of the adjustment will be as follows: A.A write down of inventory with an amount of R100 000

B.A write down of inventory with an amount of R400 000

C.A write down of inventory with an amount of R50 000

D.A write down of inventory with an amount of R200 000

3.Deterioration in operating results and financial position after the reporting period may indicate a need to consider whether the going concern assumption is still appropriate. If the going concern assumption is no longer appropriate, then the following changes are required to be made to the financial statements?

A.The basis of accounting needs to be changed and as such the financial statements need to be prepared as though they will not continue as a going concern.

B.All amounts must be adjusted accordingly in the financial statements depending on the nature of the event causing the entitys inability to continue as a going concern

C.A disclosure of the event resulting in the entitys inability to continue as a going concern is required.

D.No changes nor disclosure is required as the event occurred after the reporting date.