Fraser Ltd is a retailer with a reporting period that ends on 30 June. By 28 August 2018,
in your role as the accountant for Fraser, you have identified the following material events
that require further consideration prior to authorisation of the financial statements for the
year ended 30 June 2018.
(a) There is a decline in the market value of investments held by Fraser of $87 000 on
(b) New share capital of $150 000 is issued on 13 July.
(c) As the result of a large sale on 22 July, Fraser Ltd issues guarantees on its products
at an estimated cost of $45 000.
(d) At 30 June, accounts receivable are recorded at $430 000, of which $120 000 was
owed by Munroe Ltd. Munroe Ltd has since been placed in receivership. You received
formal notification from the receiver on 29 July that Munroe Ltd is unable to settle its
debts in full and will pay $22 000 in full settlement of its debt to Fraser Ltd. The
allowance method of accounting for accounts receivable is used.
(e) At 30 June, units of inventory were written down by $30 000 from their recorded
amount of $170 000 to their estimated net realisable value of $140 000. These units
of inventory were sold on 14 August for $165 000.
Explain the appropriate treatment of each event in accordance with the requirements of
AASB 110 ‘Events after the Reporting Period’. (LO3)
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