Reference no: EM133090186

Question - The financial year of M company ended on December 31, 20x0 and the date which the financial statements are issued approval for release is 2/28/20x1. Events occurring after the reporting date are as follows:

1. On December 31, 20x0, M company wrote off a past due receivable from N company is $20,000 because N is insolvent. On February 18, 20x1, N was acquired by X company. X then informed M that N's previous liabilities will be paid in full on 5/25/20x2.

2. Company M is being sued by an author for copyright infringement from year 20x0. The lawyer advised the management of company M that there is a 50% probability that the company will meet numerous disadvantages in this case and the estimated settlement of $50,000. Based on this advice, in the financial statements for the year ended December 31, 20x0, M has made a provision for debt payable is $50,000. On March 1, 20x1, the court decided that the author won the case and the compensation for copyright infringement is $55,500.

3. M company owns the resort with the carrying amount shown in the statement. The financial statement on December 31, 20x0 is $100 million. In the first month of 20x1, the epidemic situation appeared so there were no guests coming to the resort and the management predicted that this situation would last and maybe the resort would be closed for a long time. On February 1, 20x1, the management estimated the recoverable value of this resort is $95 million.

4. On February 20, 20x1, M company issued 300,000 common shares with a total value of $3million.

5. In the year 20x0, M company had a warehouse fire. This inventory has been purchased insurance so M submitted a claim to the insurance company on 31/10/20x0. On 12/25/20x0, M received a $10,000 insurance payment from the insurance company. On February 10, 20x1, M found out that this amount has not yet been recognized in the year-end financial statements 20x0.

6. On December 31, 20x0, the cost of M company inventory was $30,000, but the net realizable value of this inventory is measured at $25,000.

7. On February 18, 20x1, the management decided to stop a branch of the company because it was in business at a loss for a long time.

8. On February 19, 20x1, M received an unfavorable court decision about the lawsuits that had occurred in the year 20x0. Court judgments that result in the possibility of M became insolvent and went bankrupt.

Required - Determine how the above circumstances will be recognized in the financial statements dated 21/12/20x0 of M company in accordance with IAS 10. Explanation.