Reference no: EM132566088

Question - The accountant of Milana Limited is seeking your help to decide the accounting treatments, if any, for the following errors and unrecorded events/transactions.

Current financial year ends on 30 June 2020.

Auditors will sign off the accounts on 15 September 2020.

i. Inventory damages amounting to $16,500 in the central warehouse due to a fire on 20 June 2020. Inventories are not insured.

ii. A customer of Milana Ltd was declared bankrupt on 22 July 2020. The amount receivable from this customer, $14,500, is recorded as accounts receivable as at 30 June 2020. Correspondence with the liquidator indicates that the expected payout will be no more than 10c per dollar.

iii. Directors of Milana Ltd resolved to issue to the public 8,000 5% debentures of $10 each on 1 August 2020.

iv. An employee filed a lawsuit against Milana Ltd, claiming $22,000 for an injury that occurred during work in May 2020. Milana Ltd thinks that the injury occurred after work, and therefore may not be liable to pay any damages.

v. Inventories purchases on credit amounting to $18,000 on 1 July 2020 have been recognised as a June 2020 inventory purchase.

vi. Motor vehicle expenses payable amounting to $2,600 for June 2019 has not been recognised. This was found in 2 July 2020.

Ignore tax implication for the transactions above.

Required - Assuming each of the above events is material,

i. Categorise the above events/transactions as either 'adjusting' or 'non-adjusting' events.

ii. Provide journal entries for the adjusting events for the year ended 30 June 2020.