As at 30 June 2018, Montford Ltd has assets of $18 million, liabilities of $12 million,
ordinary share capital of $4 million and retained earnings of $2 million. The company’s
revenue from ordinary activities for 2017–2018 is $36 million and the net profit is
$1.6 million. As the accountant for Montford Ltd you are reviewing, on 20 August 2018,
the following events which occurred after the end of the reporting period:
(a) On 18 July 2018, one of Montford’s three warehouses was destroyed by fire. The
estimate of damage is $950 000.
(b) On 20 July 2018, the following judgement against Montford Ltd was handed down
in the Supreme Court of Victoria: that the defendant pay $275 000 to Roundhay Ltd.
Explain how these events would be accounted for in accordance with the requirements
of AASB 110 ‘Events after the Reporting Period’. (LO3)
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