Reference no: EM132985009

Craneland Business Enterprise Ltd (CBEL) is incorporated in Uganda. The directors of the company agree with the fact that for financial statements to presently fairy the financial position, financial performance and cash flows of an entity, they should comply with pronounced International Financial Reporting Standards.

Draft financial statements of CBEL have been produced and the transactions below have come to your notice as the chief accountant for CBEL.

i. Three weeks after the reporting date there was a fire at the stores which destroyed a large amount of inventory. The inventory destroyed had been included in the closing inventory at Shs 80m.

ii. Closing trade receivables are Shs 64m. Shortly after the year end a major customer was declared bankrupt. It is now anticipated that although the customer owed Shs 25m as at the year end, only 10% per million of debt will be collected.

iii. A fire shortly after the reporting date destroyed inventory valued at Shs 3m. The value of inventory at the reporting date was Shs 600m.

iv. When drafting the financial statements, the entity's accountant includes a figure of Shs 20 million as the net realisable value of damaged items of inventory. The cost of these items was Shs 30 million, and the normal selling price would be Shs 40 million. Between the reporting date and the approval of the financial statements the items are sold for Shs 31 million.

Required

Problem 1: Explain how the above should be treated in the financial statements