Financial statementdisclosures

You are the financial accountant for Superstore Ltd,and are in the process of preparing its financial statements forthe year ended 30 June 2018.  Whilst preparing the financialstatements, you become aware of the following situations:

On 1 July 2017, the directors made a decision, usinginformation obtained over the last couple of years, to revise theuseful life of an item of manufacturing equipment.  Theequipment was acquired on 1 July 2015 for $800,000, and has beendepreciated on a straight-line basis, based on an estimated usefullife of 10 years and residual value of nil.  Superstore Ltduses the cost model for manufacturing equipment.  Thedirectors estimate that as at 1 July 2017, the equipment has aremaining useful life of 6 years and a residual value of nil. No depreciation has been recorded as yet for the year ended30 June 2018 as the directors were unsure how to account for thechange in the 2018 financial statements, and unsure whether the2016 and 2017 financial statements will need to be revised as aresult of the change.

In June 2018, the accounts payable officer discoveredthat an invoice for repairs to equipment, with an amount due of$20,000, incurred in June 2017, had not been paid or provided forin the 2017 financial statements.  The invoice was paid on 12July 2018.  The repairs are deductible for tax purposes. The accountant responsible for preparing the company’s incometax returns will amend the 2017 tax return, and the company willreceive a tax refund of $6,000 as a result (30% x $20,000). No journal entries have been done as yet in the accountingrecords of Superstore Ltd, as the directors are unsure how toaccount for this situation, and what period adjustments need to bemade in.

Superstore Ltd holds shares in a listed publiccompany, ABC Ltd, which are valued in the draft financialstatements on 30 June 2018 at their market value on that date -$600,000.  A major fall in the stock market occurred on 10July 2018, and the value of Superstore’s shares in ABC Ltd declinedto $250,000.

On 21 July 2018, you discovered a cheque dated 20April 2018 of $32,000 authorised by the company’s previousaccountant, Max. The payment was for the purchase of a swimmingpool at Max’s house.  The payment had been recorded in theaccounting system as an advertising expense.  You advise thedirectors of this fraudulent activity, and they willinvestigate.

Assume that each event is material.

Required:

i) State the appropriate accounting treatment for eachsituation. Provide explanations and references to relevantparagraphs in the accounting standards to support your answers. Where adjustments to Superstore Ltd’s financial statementsare required, explain which financial statements need to beadjusted (ie. 2016, 2017, 2018 or 2019).  

ii) Prepare any note disclosures and adjusting journalentries that are needed in the 2018 financial statements for eachsituation