Tag (SQ): Events After Reporting Period

Earley Enterprises is finalising its accounts for the year ended 31 December 20X3. The following events have arisen since the year end and the financial director has asked you to comment on the final accounts.

(a) At 31 December 20X3 trade receivables included a figure of GH¢250,000 in respect of NedenCorp. On 8 March 20X4, when the current debt was GH¢200,000, NedenCorp went into receivership. Recent correspondence with the receiver indicates that no dividend will be paid to unsecured creditors.

(b) On 15 March 20X4 Earley Enterprises sold its former head office building, Whiteley Grove, for GH¢2.7 million. At the year end the building was unoccupied and carried at a value of GH¢3.1 million.

(c) Inventories at the year-end included GH¢650,000 of a new electric tricycle the Oparis. In January 20X4 the European Union declared the tricycle to be unsafe and prohibited it from sale. An alternative market, in Bongaria, is being investigated, although the current price is expected to be cost less 30%.

(d) Stingray Ltd, a subsidiary in Outer Sarnia, was nationalised in February 20X4. The Outer Sarnia authorities have refused to pay any compensation. The net assets of Stingray Ltd have been valued at GH¢200,000 at the year end.

(e) Freak floods caused GH¢150,000 damage to the Southridge branch of Earley Enterprises in January 20X4. The branch was fully insured.

(f) On 1 April 20X4 Earley Enterprises announced a 1 for 1 rights issue aiming to raise GH¢15 million.

Required

Explain how you would respond to the matters listed above.