You are finalising the 2020 financial statements of Eric Ltd for the financial year ended 31 December 2020. It is now 18 June 2021 and you are the financial controller of Eric Ltd, a company involved in the mining, refining and retail distribution of petroleum products. As part of your final review, you have asked the chief executive officer if there are any events that have arisen since the end of the financial year of which you should be made aware. He has advised you of the following events: (a) A joint venture agreement was finalised and signed on 21 January 2021 pertaining to the acquisition of Carle Ltd. It was agreed that the acquisition date shall formally be dated 1st December 2020 - Eric Ltd purchased 40% of the ordinary shares of Carle Ltd and agreed to issue its own share of 50,000 shares to acquire this investment. Eric's share price on 1 December 2020 was $17.60 per share and Eric Ltd also appointed two directors to the six-seat board of directors of Carle Ltd. The financial statements of Carle Ltd at 1 December 2020 extracted showed the following information: 1 215 000 Shareholders' equity Share capital Revaluation surplus Retained earnings Total equity 506 250 202 750 1 924 000 On 1 December 2020, all of the identifiable net assets of Carle Ltd were considered to be recorded at fair values. Eric Ltd does not have any subsidiary. On 5 December 2020, Carle Ltd declared and paid an interim dividend of $54,000, out of profits earned in December 2020. Carle Ltd earned a profit after income tax expense of $196,000 for the month of December 2020 (8 marks) (b) Eric Ltd has been incurring cost developing its refining and retail distribution software for the past several years and it is estimated to complete by the end of July 2021. The project manager has recently provided the senior management the breakdown of the cost incurred as follows: Financial year ended 2018 2019 Research (8) Development ($) $50 000 $50 000 $60 000 $70 000 $55 000 $65 000 $30 000 $40 000 $195 000 $225 000 Total (S) $100 000 $130 000 $120 000 $70 000 $420 000 2020 2021 (up to June 2021) (b) (contd.) You have also checked with your Finance Manager subsequent to the discussion with the chief executive officer and you realise that the research and development costs have been capitalised in the past as non-current assets since the year 2018 under the account code 'Development expenditure'. (8 marks) Required: classify the above events into adjusting or non-adjusting events after the end of the reporting year; explain and justify on the appropriate accounting treatments based on the relevant AASBs; and prepare the necessary notes to the financial statements and/or adjusting entries needed in relation to the above events [(a) to (b) above). The tax rate is 30%. Show all workings and state any assumptions that you may have. You are finalising the 2020 financial statements of Eric Ltd for the financial year ended 31 December 2020. It is now 18 June 2021 and you are the financial controller of Eric Ltd, a company involved in the mining, refining and retail distribution of petroleum products. As part of your final review, you have asked the chief executive officer if there are any events that have arisen since the end of the financial year of which you should be made aware. He has advised you of the following events: (a) A joint venture agreement was finalised and signed on 21 January 2021 pertaining to the acquisition of Carle Ltd. It was agreed that the acquisition date shall formally be dated 1st December 2020 - Eric Ltd purchased 40% of the ordinary shares of Carle Ltd and agreed to issue its own share of 50,000 shares to acquire this investment. Eric's share price on 1 December 2020 was $17.60 per share and Eric Ltd also appointed two directors to the six-seat board of directors of Carle Ltd. The financial statements of Carle Ltd at 1 December 2020 extracted showed the following information: 1 215 000 Shareholders' equity Share capital Revaluation surplus Retained earnings Total equity 506 250 202 750 1 924 000 On 1 December 2020, all of the identifiable net assets of Carle Ltd were considered to be recorded at fair values. Eric Ltd does not have any subsidiary. On 5 December 2020, Carle Ltd declared and paid an interim dividend of $54,000, out of profits earned in December 2020. Carle Ltd earned a profit after income tax expense of $196,000 for the month of December 2020 (8 marks) (b) Eric Ltd has been incurring cost developing its refining and retail distribution software for the past several years and it is estimated to complete by the end of July 2021. The project manager has recently provided the senior management the breakdown of the cost incurred as follows: Financial year ended 2018 2019 Research (8) Development ($) $50 000 $50 000 $60 000 $70 000 $55 000 $65 000 $30 000 $40 000 $195 000 $225 000 Total (S) $100 000 $130 000 $120 000 $70 000 $420 000 2020 2021 (up to June 2021) (b) (contd.) You have also checked with your Finance Manager subsequent to the discussion with the chief executive officer and you realise that the research and development costs have been capitalised in the past as non-current assets since the year 2018 under the account code 'Development expenditure'. (8 marks) Required: classify the above events into adjusting or non-adjusting events after the end of the reporting year; explain and justify on the appropriate accounting treatments based on the relevant AASBs; and prepare the necessary notes to the financial statements and/or adjusting entries needed in relation to the above events [(a) to (b) above). The tax rate is 30%. Show all workings and state any assumptions that you may have