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Determine the amount profit of cherry company

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Reference no: EM132563131

Cherry Company is in the process of finalizing the financial statements for the year ended 31 December 2018 and came across the following issues. Its profit after tax before the following adjustments is RM 1.65 million. The authorization date for the financial statements is 31 March 2019.

(i) The tax rate applicable to the company has been changed from 26% to 25% on 15 January 2019. This new rate is announced to be applied starting for financial year 2019.

(ii) Major fire broke out in one of its factories on 15 February 2019 and destroyed the inventory valuing RM50,000, the sale value of which is now nil.

(iii) A debtor that owes the company RM30,000 was declared bankrupt by the Insolvency Department on 6 January 2019.

(iv) The fair value of investment property held by the company at the reporting date was RM1.2 million. However, a major flood on 5 January 2019 has been affecting the value of this investment property. On 28 March 2019, an independent property valuer estimated that the fair value now has decreased to RM900,000.

Required:

Question (i) For each case, discuss the accounting treatment.

Question (ii) Determine the amount profit of Cherry Company for the year ended 31 December 2018.

Reference no: EM132563131

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