Reference no: EM132789029

Question - Discuss the accounting treatment to the cases below:

Air Nyaman Bhd (ANB) manufactures and sells fruit drinks. After consuming the drinks of ANB over a long period, a customer had become sick. Consequently, he had to be treated by the doctor and had to take unpaid leave for his employment. He took legal action and sued ANB for RM600,000 for pain and agony caused by consuming the drink, and also had to take unpaid leave.

ANB had made provision for liability of RM100,000. The court case was pending at the end of the year. Somehow, the case came to court and the judgement was in favour of the consumer a month after the financial year-end but before the financial statements were authorized for issue. He was awarded damages of RM500,000.

Entity makes a provision for doubtful debts of 10% on all its receivables. After the end of the financial year, the customer who owed RM3 million declared a bankrupt.

At the reporting period, the carrying amount of inventory of Hamimah was RM86,000 and the net releasable value was RM104,000. The inventory was sold at RM84,000 after the year end but before the financial statement were authorized for issue.

The current financial year-end of Mangga Bhd was on 31st March 2019. On 16 April 2020, the board of directors agreed to sell a subsidiary called Melor Bhd. The directors authorized the financial statements for issue on 30 August 2020.

Identify and explain the nature of the above event and the appropriate accounting treatment.