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Explain whether accountant has proposed correct treatment

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Reference no: EM133007274

Rover Ltd has a year-end of 30 June 2021. The accountant has prepared the following schedule with details of several events and their proposed treatment in the financial statements.

Event Proposed

  • The notification of a customer's bankruptcy who owes $25,000 on 30 June 2021 and now owes $30,000. The liquidator has indicated that the debt will not be recoverable.
  • A major production plant was destroyed by fire on 1 July 2021.
  • Ordinary dividends declared on 1 August 2021 regarding profits for the period ended 30 June 2021.
  • Discovery of a significant fraud on 15 July 2021, resulting in losses to the company.

Treatment

  • Write off $30,000 debt as it is irrecoverable.
  • No adjustment or reference to the issue is required as the fire took place after the year-end.
  • Liability for dividends payable recognised.
  • No adjustment is required as the fraud was discovered after the period end.

Problem 1: In each of the instances above, please explain whether the accountant has proposed the correct treatment and, if not, what the required treatment should be?

Reference no: EM133007274

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