Reference no: EM132571267

Question - Kelog Bhd manufactures breakfast cereals at their factory in Nilai and Penang. The audit for the year ended 30 June 2019 is almost finish and the financial statements and audit report are due to be signed on 1 August 2019. Profit before taxation is RM2.3 million. The following events have occurred subsequent to the year end and no amendments or disclosures have been made in the financial statements.

On 15 August 2019, a fire occurred at their factory in Nilai. The fire resulted in extensive damage to 40% of the company production facilities. The company estimates the level of damage to the facilities to be in excess of RM200,000. Only a minimal level of inventory, approximately RM20,000 was damaged.

On 20 July 2019, it was discovered that a large batch of Kelog Bhd's new cereal brand; Strawberry Loops; held in inventory at the year-end was defective, as the cereal contained too much strawberry food coloring. To date no sales of this new cereal have been made. The cost of the defective batch of inventory is RM300,000 and the defects cannot be corrected. However, the scrapped cereal can be utilised as a raw material for an alternative cereal brand at a value of RM50,000.

Required - For each of the subsequent event described above explain whether the financial statements require amendment or disclosure.