Part B: In your audit of Melbourne Ltd for the calendar year 2021, you found some matters that you believe represent possible adjustments to the company's books. As a result, you list the following 3 items considered material for review by the engagement manager: Item 1: The company has not established a reserve for the obsolescence of inventories, Your test indicated that such as $30,000 reserve is appropriate under circumstances. Item 2: Your review of the electricity bill indicates that it is understated by 24,000. Item 3: Bonus shares were issued on 1 September 2021 in the amount of $80,000 of its ordinary shares, payable 1 January 2022 to the key shareholders on record as 30 September 2021. Required: 1. Explain the difference between the two types of subsequent events. 2. For each item, classify which type of subsequent event it belongs to.

Part B: In your audit of Melbourne Ltd for the calendar year 2021, you found some matters that you believe represent possible adjustments to the company's books. As a result, you list the following 3 items considered material for review by the engagement manager: Item 1: The company has not established a reserve for the obsolescence of inventories, Your test indicated that such as $30,000 reserve is appropriate under circumstances. Item 2: Your review of the electricity bill indicates that it is understated by 24,000. Item 3: Bonus shares were issued on 1 September 2021 in the amount of $80,000 of its ordinary shares, payable 1 January 2022 to the key shareholders on record as 30 September 2021. Required: 1. Explain the difference between the two types of subsequent events. 2. For each item, classify which type of subsequent event it belongs to.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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