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State financial asset and financial liability may be offset

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Question 1: In each of the situations below, state whether the financial asset and financial liability may be offset in the books of Sunset Tours Ltd A as at 30 June 2019 and explain why.

(a) Sunset Tours Ltd owes Helicopter Ltd $500 000, due on 30 June 2020. Joyflights Ltd owes Sunset Tours Ltd $300 000, due on 30 June 2020.

(b) Sunset Tours Ltd owes Darwin Accommodation Ltd $500 000, due on 30 June 2020. Darwin Accommodation Ltd owes Sunset Tours Ltd $500 000, due on 30 June 2020. A legal right of set-off between the two companies is documented in writing, and the parties have indicated their intent to settle the amounts on a net basis.

(c) Sunset Tours Ltd owes Global Holidays Ltd $500 000, due on 30 June 2021. Sunset Tours Ltd has plant and equipment with a fair value of $500 000 that Global Holidays Ltd has secured as collateral for the debt to Sunset Tours Ltd.

Reference no: EM132593046

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