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Waxworks current year end is 31 March 2009. Its financial statements were authorised for issue by its directors on 6 May 2009 and the AGM (annual general meeting) will be held on 3 June 2009. The following matters have been brought to your attention: (i) On 12 April 2009 a fire completely destroyed the companys largest warehouse and the inventory it contained. The carrying amounts of the warehouse and the inventory were $10 million and $6 million respectively. It appears that the company has not updated the value of its insurance cover and only expects to be able to recover a maximum of $9 million from its insurers. Waxworks trading operations have been severely disrupted since the fire and it expects large trading losses for some time to come. (4 marks) (ii) A single class of inventory held at another warehouse was valued at its cost of $460,000 at 31 March 2009. In April 2009 70% of this inventory was sold for $280,000 on which Waxworks sales staff earned a commission of 15% of the selling price. (3 marks) (iii) On 18 May 2009 the government announced tax changes which have the effect of increasing Waxworks deferred tax liability by $650,000 as at 31 March 2009. (3 marks) Required: Explain the required treatment of the items (i) to (iii) by Waxwork in its financial statements for the year ended 31 March 2009. Note: assume all items are material and are independent of each other

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