Question
Wonder Child Ltd (WCL) has provided the following information concerning events occurring between after the end of the reporting period (i.e. 30 June 2020) and
Wonder Child Ltd (WCL) has provided the following information concerning events occurring between after the end of the reporting period (i.e. 30 June 2020) and before the date the financial statements were authorised to issue on 15 August 2020.
1. A traffic accident has caused two of WCLs transport vehicles with damages of $840,000 in total. Insurance will cover $630,000 of the damages but payment of the insurance claim has been delayed by a police investigation. As a result of the loss of these vehicles, WCLs delivery schedules have been severely disrupted.
2. The release of a superior product by a competitor on 28 June 2020 caused a major decline in demand for a product made by WCL. In an effort to sell remaining inventory of the product at 30 June 2020, WCL has reduced its selling price to 70% of cost.
3. The Department of Occupational Health and Safety charged WCL over unsafe storage practices that resulted in the leakage of toxic materials into a river. The leakage occurred on 2 July 2020. If found to be negligent by the court, the company will have to pay a fine of $700,000.
4. The purchasing manager of WCL discovered that a batch of invoices relating to June 2020 inventories purchases had not been processed.
5. WCL issued a prospectus offering $5.6 million 10% debentures for public subscription. The debentures are redeemable on 1 September 2020. Assume all events and transactions are material.
Required
Classify the five events as either adjusting or non-adjusting events after the end of the reporting period for the year ended 30 June 2020 of WCL with reference to HKAS 10 Events after the Reporting Period. Justify your classification.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started