50.1K

Verified Solution

Link Copied!

Jack Wood is the engagement audit partner for the financial report audit of Clayton Ltd for the year ended 31 December, 2017. The following material events or transactions have come to Wood's attention before he is scheduled to issue his report on 28 February, 2018. (a) on 3 January, 2018, Clayton Ltd received a shipment of raw materials from Bangkok. The materials had been ordered in October 2017, and shipped FOB shipping point in November 2017 (.e. rights to the goods transferred to Clayton Ltd at time of shipping). (b) On 15 January, 2018, the company settled and paid a personal injury claim of a former employee as the result of an accident that occurred in March 2015. The company had not previously recorded a liability for the claim. (c) On 25 January, 2018, the company agreed to purchase for cash the outstanding shares of Monash Electrical Ltd. The acquisition is likely to double the sales volume of Clayton Ltd. (d) On 1 February, 2018, a plant owned by Clayton Ltd was damaged by a flood, resulting in an uninsured loss of inventory. Required: For each of the above events or transactions, indicate the treatment required in the financial report as either (a), (b) or (c) below: (a) Adjust the 31 December 2017 Financial Report (b) Disclose the information in the noted to the 31 December 2017 Financial Report (c) No action is required Give reasons for your decision. [4 x 2 marks = 8 marks]

Answer & Explanation Solved by verified expert

See Answer