Classify events as either adjusting or non-adjusting events

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The directors of Camel Ltd have contacted you to seek your help with the following two issues that they have encountered when finalising the financial statements for the year ended 30 June 2020. The financial statements will be authorised for issue on 30 October 2020. Assume all events are material.

(i) On 30 June 2020, a fire destroyed part of the building of the warehouse in Rotorua, and it was notified to the directors of the head office in Auckland after 2 days. Due to an oversight by the management, the insurance cover for the building has not been renewed after 2019. As a result of this, the building damage has been estimated at $265,000.

(ii) On 30 June 2020, Horse Ltd owed Camel Ltd $250,000. On 30 July 2020, Camel Ltd received a notice that Horse Ltd had become insolvent.

Required:

Problem 1: Classify the above events as either adjusting or non-adjusting events using NZ IAS 10 principles. Justify your classification and prepare necessary journal entries (if any) or note disclosures (if any) to comply with the requirements of NZ IAS 10.

Reference no: EM132672291

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