Reference no: EM132641423
The statutory audit of ABC Inc. for year ended June 30, 2005, was completed on August 30, 2005. The financial statements were signed by the managing director on September 8, 2005, and approved by the shareholders on October 10, 2005. The next events have occurred.
1) On July 15, 2005, a customer owing $900,000 to ABC Inc. filed for bankruptcy. The financial statements include an allowance for doubtful debts pertaining to this customer only of $50,000.
2) ABC Inc.'s issued capital comprised 100,000 equity shares. The company announced a bonus issue of 25,000 shares on August 1, 2005.
3) Specialized equipment costing $545,000 purchased on March 1, 2005, was destroyed by fire on June 13, 2005. On June 30, 2005, ABC Inc. has booked a receivable of $400,000 from the insurance company pertaining to this claim. After the insurance company completed its investigation, it was discovered that the fire took place due to negligence of the machine operator. As a result, the insurer's liability was zero on this claim by ABC Inc.
Required:
Problem a: How should ABC Inc. account for these three post-balance sheet events?
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