Tag (SQ): Litigation

Kumasi Ltd is preparing its financial statements for the year ended 30 September 20X4. The following matters are all outstanding at the year end.
(1) Kumasi Ltd is facing litigation for damages from a customer for the supply of faulty goods on 1 September 20X4. The claim, which is for GH¢500,000, was received on 15 October 20X4. Kumasi Ltd’s legal advisors consider that Kumasi Ltd is liable and that it is likely that this claim will succeed. On 25 October 20X4 Kumasi Ltd sent a counter-claim to its suppliers for GH¢400,000. Kumasi Ltd’s legal advisors are unsure whether or not this claim will succeed.
(2) Kumasi Ltd’s sales director, who was dismissed on 15 September, has lodged a claim for GH¢100,000 for unfair dismissal. Kumasi Ltd’s legal advisors believe that there is no case to answer and therefore think it is unlikely that this claim will succeed.
(3) Although Kumasi Ltd has no legal obligation to do so, it has habitually operated a policy of allowing customers to return goods within 28 days, even where those goods are not faulty. Kumasi Ltd estimates that such returns usually amount to 1% of sales. Sales in September 20X4 were GH¢400,000. By the end of October 20X4, prior to the drafting of the financial statements, goods sold in September for GH¢3,500 had been returned.
(4) On 15 September 20X4 Kumasi Ltd announced in the press that it is to close one of its divisions in January 20X5. A detailed closure plan is in place and the costs of closure are reliably estimated at GH¢300,000, including GH¢50,000 for staff relocation.

Required
State, with reasons, how the above should be treated in Kumasi Ltd’s financial statements for the year ended 30 September 20X4