Financial Accounting Regulation Academic Essay

Jolly’s Boats is an entity that manufactures boats and supplies.
The financial year end is 30 June 2016. Below is an extract of its draft financial statements:
Financial information:
$
Net Assets
4,000,000
Net profit after tax
650,000
Before the financial statements are finalised, the following information is provided:
Assume each event is independent of each other:
1. On 31 July 2016 directors declare a final dividend of $2 per share.
2. At a directors’ meeting held in June 2016, the decision was made to close a division of the business, due to a decrease in customer demand. The division was closed in August 2016 and the costs amounted to $1.6 million.
3. On 5 September 2016 the directors became aware that the boat engines they had been selling since mid-July 2016 were over-heating and not working during hot weather. The engines were purchased by Jolly’s Boats on July 5 2016. By late September 2016 there were numerous claims made against the company by a number of customers.
4. Jolly’s Boat’s main customer is declared insolvent on 15 July 2016. The customer owed Jolly’s Boats $550,000 as at 30th June 2016.
5. In July 2016 the court awarded Jolly’s boats with damages of $1 million. Jolly’s boats took against 2 years ago (2014), against a supplier due to faulty materials being supplied.
Required: Determine how each event should be disclosed in the financial statements for the year ended 30th June 2016. Identify if it is an adjusting or non-adjusting event, and what accounts will be effected if applicable.
ACCT2007 Weekly assignment –Module 7
Question 2 (8 marks)
The following transactions and events relate to Jatz Ltd, a small catering business. The reporting year end is 30th June 2016. Each event is independent of each other.
1. On 17 August 2016 a lawsuit was lodged against the company by customers who were poisoned from a catering function delivered by Jatz Ltd on 17th July 2016. The customers are claiming $1 million in damages. No date has been set for the court hearing.
2. On 1 September 2016 the directors resolved to issue to the public 10 000 %5 debentures of $10 each, payable $5 on application and $5 on allotment.
3. On 21 August 2016, the supply manager discovered that a batch of invoices relating to June 2016 inventory purchases had not been processed. The invoices total $37,650.
4. On 18 July 2016 a competitor launched a catering business, offering better services for cheaper prices. This caused a major decline in business for Jatz Ltd. As a result Jatz Ltd has reduced costs and 7 employees lost their jobs on 31st July 2016, as a consequence.
Required:
Determine how each event should be disclosed in the financial statements for the year ended 30th June 2016. Identify if it is an adjusting or non-adjusting event, and what accounts will be effected if applicable.