Prior to the finalisation of the financial statements for the year ended 30 June 2014,a company experienced a number of material events,including:
I on 10 July 2014 the directors decided to close a division of the company at an estimated cost of $1 000 000.
II on 10 August 2014 a court decision found the company liable to pay damages of $500 000 to a major customer who had commenced legal action in April 2012.
III an independent valuation of property conducted on 20 July 2014 revealed that the directors' valuation included in the 30 June 2014 financial statements was overstated by $700 000.
In respect of the events listed above,it will be necessary to adjust the financial statements,by way of general journal entries,for:

Question

Quizplus · Accepted Answer

Event II is an adjusting event as the court decision confirms a condition that existed before the balance sheet date. Event III is also an adjusting event as it provides evidence of conditions that existed at the balance sheet date. Event I is a non-adjusting event as the decision to close a division occurred after the balance sheet date, requiring only note disclosure.

Prior to the Finalisation of the Financial Statements for the Year