FIN621 # 1st GDB Solution Spring 2013

The management of XYZ Company has presented draft financial statements for the year ended 30 June 2012 to the Board of Directors.
There were some material points that were unresolved.

The flood of July 2012 destroyed one of the company’s buildings. The estimated value of the building was Rs. 5m, but it was insured for only Rs. 4m. The company’s going concern status is not endangered. The directors are unsure what adjustment or disclosure, if any, should be made.
There were some goods with cost of Rs. 130,000, and these goods were part of the closing inventory at 30 June 2012. These goods were sold for Rs. 70,000 after their deterioration in the inventory stores. The directors of the company are not sure whether to adjust he figure of the inventory downwards by Rs. 60,000 or a loss should be recognized when the inventorydeterioration was disclosed.
In June 2012 Company has supplied some goods to a customer on a sale on return basis. The value of the goods was Rs. 120,000. The company recorded this transaction as credit sale, and as a result of this transaction a profit of Rs. 30,000 was earned by the company. However, the customer returned all goods in fine condition in July 2012.

Requirement:
Suggest the correct treatment of each item to the Board of Directors. Give reason for your answer and state clearly the effect, if any, on the income statement and Balance sheet of the company.
Regards,

LAst main kuch aisa banta hai
inventory 120000 dr
Sales --------------------------120000 cr
koun ke expacted earning record nahi ki jati.
baqi aap kar ke dhekahoooo.

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