Reference no: EM131538294
Question: Events after the reporting period Snapper Ltd is finalising its financial statements for the reporting period ending 30 June 2016. On 26 August 2016, before the financial statements have been finalised and authorised for issue, the company's directors became aware of the following situations:
a) The company owns a night club that was completely destroyed by fire on 25 August 2016. The night club had a carrying amount in the draft financial statements of $1,750,000 at 30 June 2016 (which was equal to its fair value), and was insured for $1,500,000. The company has adequate business interruption insurance
b) Snapper held 1,000,000 shares in Prawn Ltd, representing 10% of that company's share capital, at 30 June 2016. These shares had a carrying amount of $500,000, reflecting a cost of $0.50 per share. On 1 August 2016, Snapper entered into a contract to purchase a further 5,000,000 shares in Prawn (50% of the company's share capital) for $5,000,000, reflecting the current market value at that date of $1 per share.
c) On 5 August 2016, the directors of Snapper Ltd approved the sale of its fishing business in Tasmania. The sale will result in a profit of $79,000 being made by Snapper Ltd.
d) On 8 August 2016, Snapper Ltd received an invoice from a supplier for $85,000 for goods delivered in June; the goods were included in closing inventory at an estimated cost of $100,000.
e) On 10 June 2016, Snapper Ltd was fined $55,000 by the Australian Taxation Office for not lodging its 2015 income tax return by the due date.
The fine has been recognised in Snapper Ltd's draft financial statements at 30 June 2016 (with an expense of $55,000 recognised, and a payable of $55,000 recognised). On 12 August 2016, after weeks of correspondence and pleading with the Taxation Office, the Taxation Office reduced the fine from $55,000 to $5,000. Required: State, for each situation, whether the event is an adjusting event or non-adjusting event (assuming the amount is material). Provide explanations and references to relevant paragraphs in the accounting standards to support your answers. State the appropriate accounting treatment (including any journal entries needed) for each situation in the 2016 financial statements.