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BKAF2043 Financial AccountingReporting1
Assignment 10
Question 1
An entity made a provision for doubtful debts of 2% of its receivables and the amount provided for at
the end of 31 December 2004 was RM1.5 million. On 15 January, a debtor who owed the entity RM2
million became insolvent. The entity will:
A. Make a disclosure as it is a non-adjusting event
B. Adjust the financial statements of year 2005 as it is an adjusting event.
C. Adjust the financial statements of year 2004 as it is an adjusting event
D. Ignore event
Question 2
As at 31 December2002, an entitydetermineditsclosinginventory as RM2.5million based on cost. Part
of the inventoryof RM1 millionwasdamagedbut the entity expected the goods to be sold above cost.
However, these goods were sold on 19 January 2003 for RM800,000. The entity will:
A. Increase its cost of sales by RM200,000 and reduce its closing inventory by RM200,000
B. Make a disclosure but not adjust the financial statements
C. Treat it as an adjusting item and the loss of RM200,000 is disclosed as an operating loss.
D. Recognize the loss in year 2003
Question 3
Indicate if the followingeventsortransactionsare adjustingornon-adjustingitems.If theyare adjusting
itemsdiscussthe effectonthe financial statements. Year-end was 31 December 2004 and the accounts
were authorized for issue on 15 March 2005.
(a) Entity makes a provision for doubtful debts of 1% and the amount provided for at the end of
31December 2004 was RM500,000. On 15 January, a debtor who owned the entity RM2 million
became insolvent.
(b) Closing inventory was determined as RM1.5 million based on cost. Part of the inventory of
RM200,000 was damaged but the store-keeper expected the goods to be sold above cost.
However, these goods were sold on 19 January for RM120,000.
(c) Entity signed a contract to acquire a factory building on 10January 2005. The estimated cost of
the building was RM130 million.
(d) On 28 February 2005, the entity decided to close down its shoemaking operation which was
identified as a separate operation from the rest of the entity’s business.

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(e) The factory plantwas damagedon 3 March 2005 and the recoverable amountwas estimated to
be Rm1.2 million and the carrying value was RM1.5 million.
(f) Entity proposed the final ordinary dividend on 1 March 2005.
(g) A civil suit was brought against the entity before the end of the financial year. The lawyers
advisedthe companywouldlose the case and suffer a loss of RM1.2 million. On 10 March 2005,
the company and the complainant agreed to settle it out of court. The company paid RM1
million.
Question 4
A. WTM Bhd. financial year-end was 31 March 2011. The company’s financial statements were
authorised for issue by its directors on 6 May 2011. On 12 April 2011, a fire completely destroyed
the company’s largest warehouse and the inventory it contained. The carrying amounts of the
warehouse andthe inventorywereRM10 millionandRM6 million,respectively.Itappearedthatthe
companywas coveredRM9 millionfromitsinsurers.WTM’strading operations have been severely
disrupted since the fire and it expected large trading losses for some time to come.
REQUIRED:
Show the effect of the above transaction in the financial statements in accordance to MFRS110
Events After the Reporting Period.