Reference no: EM132569417

Question - The Lourve Ltd, a public listed company, is in the business of fashion and retail. It is now 12 December 2018 and the accountants of The Lourve Ltd are in the process of finalising the financial statements of The Lourve Ltd for the financial year ended 31 October 2018. All amounts in the information below are material. The following events took place after the year 31 October 2018 had ended:

(i) One of The Lourve Ltd's largest customers, Cleveland Co, is experiencing financial difficulties. At the yearend Cleveland Co owed The Lourve Ltd $250,000, against which the Company made a 5% specific allowance for expected credit losses. Shortly after the year end Cleveland Co paid $30,000 of the outstanding amount due but has since experienced further problems, leading to their primary lender presenting a formal request that Cleveland Co be liquidated. If successful, only secured creditors are likely to receive any reimbursement.

With reference to applicable and relevant accounting standards (AASBs/IFRSs),

(i) Classify the above events into adjusting or non-adjusting events after the end of the reporting year;

(ii) Explain and justify on the appropriate accounting treatment; and

(iii) Prepare the necessary notes to the financial statements or adjusting entries needed in relation to the above event.