You are required to explain how you will treat the situation below in the financial statements, and give a brief explanation of why you are adopting your proposed treatment Assuming that the companys year end is 31 December each year The government has introduced a number of changes to the income tax system As a result, the company has decided to retrain some of its administrative and sales workforce in order to ensure compliance At 31 December no retraining of staff has yet taken place 3 marks In connection with the company being under insured, a claim for building repairs costing RM50,000 (which arose because of storm damage in November) remains unsettled The insurers have offered RM20,000 and at best this may be raised to RM30,000, though the companys lawyers are doubtful that it will be increased 3 marks The company guarantees all furniture sold to the public through its own department store and by mail order, for a period of 10 years This normally results in annual refund, repair and replacement costs of approximately 4 of these sales Last year these sales totaled RM750,000 Events in the period since the year end indicate that a similar level of claims can be expected this year 4 marks

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You are required to explain how you will treat the situation below in the financial statements, and give a brief explanation of why you are

You are required to explain how you will treat the situation below in the financial statements, and give a brief explanation of why you are adopting your proposed treatment. Assuming that the companys year-end is 31 December each year.

The government has introduced a number of changes to the income tax system. As a result, the company has decided to retrain some of its administrative and sales workforce in order to ensure compliance. At 31 December no retraining of staff has yet taken place.

[3 marks]

In connection with the company being under-insured, a claim for building repairs costing RM50,000 (which arose because of storm damage in November) remains unsettled. The insurers have offered RM20,000 and at best this may be raised to RM30,000, though the companys lawyers are doubtful that it will be increased.

[3 marks]

The company guarantees all furniture sold to the public through its own department store and by mail order, for a period of 10 years. This normally results in annual refund, repair and replacement costs of approximately 4% of these sales. Last year these sales totaled RM750,000. Events in the period since the year-end indicate that a similar level of claims can be expected this year.

[4 marks]