Reference no: EM132964271

Zephyr is a manufacturer and trader of consumer products. Its accounting year ends 31 December each year. The management of Zephyr are finalizing their accounts of 20X3 accounts and hope to meet the proposed deadline of 31 March 20X4 when the financial statements are expected to be authorized for issue. The following list was prepared by the finance manager for the attention of the financial controller:

a) On 9 January 20X4, the company's factory was destroyed by fire caused by sabotage. The factory was not insured sufficiently and the loss suffered from the fire was estimated to be $ 400,000.

b) In mid-March 20X4, manufacturing defects were discovered in product XY101 Product XY101 was manufactured and sold since July 20X2. Zephyr was advised by its lawyers that it was highly probable that the company will have to pay damages of $850,000 for product XY101.

c) Zephyr acquired 80% of the ordinary share capital one its long-time rival Zac on 1 February 20X4.

d) One of Zephyr's trade receivables balance of $60,000 is from a customer called Joe. At the end of the reporting period, no provision for doubtful debt or bad debt had been recognised for Joe. On 1 February 20X4, Zephyr is informed that Joe is going into liquidation as a result of declining business over the past couple of years and Joe is very unlikely to settle the outstanding trade receivable.

Required:

Problem 1: Indicate whether the above events after the reporting period should be classified as 'adjusting' or non-adjusting' events and suggest appropriate accounting