Reference no: EM132592694

The following information relates to Pear Ltd in the preparation of its financial statements for the year ended 30 June 2020:

(a) The issue of debentures of $500 000 to a private investor was approved by the board of directors on 28 June 2020 but the debenture issue did not take place until 17 July 2020.

(b) On 23 July 2020 a favourable judgement was handed down in a lawsuit lodged by the company against a major supplier for damages arising from poor-quality materials delivered in April 2019. The damages and costs awarded to the company totalled $1,000,000.

(c) On 2 August 2020, the purchasing manager discovered that a batch of invoices relating to raw material purchased in June had not been processed. The invoices totalled $37,650.

(d) On 5 August 2020, one of the company's production plant was destroyed in a fire resulting in damages of $300,000. The loss from the damage is expected to be fully recovered from insurance claim. However, as a result of the loss of the plant, the company's production has been severely disrupted.

Assume all items are material.

Required

Question 1. Classify the above events as either adjusting or non-adjusting events after the end of the reporting period. Justify your classification.

Question 2. Based on your answer to requirement 1, prepare the necessary journal entries or note disclosures to comply with the requirements of AASB 110.