Question

In: Accounting

Filzen Company has a fiscal year end of December 31, 2018. On January 3, 2019 a...

Filzen Company has a fiscal year end of December 31, 2018. On January 3, 2019 a fire destroys a factory that belongs to Filzen. The fire is not considered an extraordinary event because Filzen produces gun powder; however, it is considered to have a material effect on the financial position of the company. On February 3, 2019, it is determined that the fire has resulted in a $25,000,000 loss to Filzen. On March 31, 2019, Filzen issues it 2018 financial statements. How will the $25,000,000 loss be reported in the 2018 financial statements?

Solutions

Expert Solution

As per IAS 10 ( International Accounting Standard ) " Event After the Reporting Period"

This standard provide necessary disclosures requirement in respect of event occure after balance sheet date.

This event may be Adjusting event or Non Adjusting event.

Adjusting Event

Adjusting event is the event that arose after the end of the reporting period, but provides further evidence of conditions that existed at the end of the reporting period.

Accounting Treatment of Adjusting Event in Financial statements

This events should be adjusted in Financial statements

Non - Adjusting Event

Non-adjusting event is an event after the reporting period that indicates conditions arising after the end of the reporting period.

Accounting Treatment of Non - Adjusting Event in Financial statements

This event do not adjust in financial statements. The following disclosure shall be made

# The nature of the Event, and

# An estimate of its financial effect or a statement that such an estimate cannot be made.

As per the Question Filzen Company closing his account as on 31-12-2018 and this event occure after balance sheet date. Hence it is Non Adjusting event.

However, if this loss effect going concern basis assumption then financial statments may have to prepared on a basis other than going concern.

So, if the going concern assumption is considered to the appropriate even after this material loss, no adjustment is required in the financial statemens for the year ending 31.12.2018.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Assume the year end for Oblix Company is December 31. Selected transactions of fiscal year 2018...
Assume the year end for Oblix Company is December 31. Selected transactions of fiscal year 2018 for Oblix Company are presented below. All accounts are in normal balance: Beginning balance account receivable, $8,162; beginning balance allowance for doubtful accounts, $272. Service revenue all on account, $75,906. Collections on account, $74,628. Write-offs of uncollectible accounts receivable, $200. Recovered an account receivable that had been previously been written off, $100. Aging schedule of accounts receivable at year-end: Days Outstanding Outstanding Amount %...
Baltimore Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018,...
Baltimore Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance that consists of: Dollar Value Age of Account Estimated Collectible $140,000 < 30 days old 98% 60,000 30 to 60 days old 88% 30,000 61 to 120 days old 70% 11,000 > 120 days old 10% The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted...
Arundel Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018,...
Arundel Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance that consists of: Dollar Value Age of Account Estimated Collectible $290,000 < 30 days old 99.5% 60,000 30 to 60 days old 90.5% 25,000 61 to 120 days old 70.5% 14,000 > 120 days old 10.0% The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted...
Arundel Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018,...
Arundel Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance that consists of: Dollar Value Age of Account Estimated Collectible $235,000 < 30 days old 99.5% 65,000 30 to 60 days old 91.5% 35,000 61 to 120 days old 71.5% 6,000 > 120 days old 19.0% The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted...
Arundel Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018,...
Arundel Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance that consists of: Dollar Value Age of Account Estimated Collectible $235,000 < 30 days old 98.0% 60,000 30 to 60 days old 95.0% 25,000 61 to 120 days old 77.0% 6,000 > 120 days old 17.0% The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted...
Van Rushing Hunting Goods’ fiscal year ends on December 31. At the end of the 2018...
Van Rushing Hunting Goods’ fiscal year ends on December 31. At the end of the 2018 fiscal year, the company had notes payable of $9.2 million due on February 8, 2019. Rushing sold 2.0 million shares of its $0.25 par, common stock on February 3, 2019, for $5.6 million. The proceeds from that sale along with $3.6 million from the maturation of some 3-month CDs were used to pay the notes payable on February 8. Through his attorney, one of...
A company has a fiscal year-end of December 31: (1) on October 1, $14,000 was paid...
A company has a fiscal year-end of December 31: (1) on October 1, $14,000 was paid for a one-year fire insurance policy; (2) on June 30 the company lent its chief financial officer $12,000; principal and interest at 6% are due in one year; and (3) equipment costing $62,000 was purchased at the beginning of the year for cash. Prepare journal entries for each of the above transactions. (If no entry is required for a transaction/event, select "No journal entry...
Company XYZ is an SEC filer that has a fiscal year-end of December 31. XYZ’s Indian...
Company XYZ is an SEC filer that has a fiscal year-end of December 31. XYZ’s Indian subsidiary (XYZ India) has historically closed its books on a one month lag (i.e., as of November 30) in order to meet the parent company’s reporting deadline. The Company has consistently disclosed this information in the footnotes to its Form 10-K. During the second quarter of 20X9, XYZ India upgraded its systems and is able to complete its close process within a shorter period...
Juniper Bush Farm has a December 31 fiscal year end. The company has six notes payable...
Juniper Bush Farm has a December 31 fiscal year end. The company has six notes payable outstanding on December 31, 2014, as follows: 1. A nine-month, 5%, $25,000 note payable issued on July 1, 2014. Interest is payable monthly on the first day of each month starting on August 1. 2. A six-month, 4%, $10,000 note payable issued on September 1, 2014. Interest and principal are payable at maturity. 3. A seven-month, 4.5%, $40,000 note payable issued on November 1,...
BETHESDA MINING COMPANY Balance Sheets as of December 31, 2018 and 2019 2018 2019 2018 2019...
BETHESDA MINING COMPANY Balance Sheets as of December 31, 2018 and 2019 2018 2019 2018 2019 Assets Liabilities and Owners’ Equity   Current assets   Current liabilities     Cash $ 42,646 $ 54,402      Accounts payable $ 191,422 $ 199,111     Accounts receivable 60,781 81,139      Notes payable 86,520 138,088     Inventory 127,265 193,375             Total $ 277,942 $ 337,199       Total $ 230,692 $ 328,916   Long-term debt $ 240,000 $ 176,750   Owners’ equity      Common stock and paid-in surplus $ 215,000 $ 215,000      Accumulated retained earnings 155,597 189,495...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT