Explain (with reasons) how and where (including class/category where applicable) each of the events/transactions described below would be treated, recognised and/or disclosed in the financial reports of Vurture Ltd for the year ended 30 June 2021. Note: You need to consider whether information about the event or transaction needs to be presented separately. Journal entries and actual disclosure notes are NOT required. (a) On 5 July 2021, the government announced new regulations relating to the sale and use of the flying exo-suits. Part of the new regulations require that from 1 September 2021 exo-suits can only be sold to persons who have a 'Flying Exo-Suit Permit'. A person must apply to the government for a permit and pay a fee of $400. The permit must be provided before an exo-suit can be sold. Vulture sells two types of exo-suits: an economic exo-suit and an advanced exo-suit, and sales have been increasing for Vulture Ltd over the last 3 years. There is expected to be a significant increase in sales of exo-suits until the regulations apply. Once the change in regulations applies, it is anticipated this will reduce the sale of economic exo-suits by 80% and of advanced exosuits by 20%. This is estimated to result in a reduction in expected profit of around 6% for the year ending 30 June 2021 but 21% in future years.
Explain (with reasons) how and where (including class/category where applicable) each of the
events/transactions described below would be treated, recognised and/or disclosed in the
financial reports of Vurture Ltd for the year ended 30 June 2021.
Note: You need to consider whether information about the event or transaction needs to be
presented separately.
(a) On 5 July 2021, the government announced new regulations relating to the sale and
use of the flying exo-suits. Part of the new regulations require that from 1 September
2021 exo-suits can only be sold to persons who have a 'Flying Exo-Suit Permit'. A person
must apply to the government for a permit and pay a fee of $400. The permit must be
provided before an exo-suit can be sold. Vulture sells two types of exo-suits: an
economic exo-suit and an advanced exo-suit, and sales have been increasing for
Vulture Ltd over the last 3 years. There is expected to be a significant increase in sales
of exo-suits until the regulations apply. Once the change in regulations applies, it is
anticipated this will reduce the sale of economic exo-suits by 80% and of advanced exosuits by 20%. This is estimated to result in a reduction in expected profit of around 6%
for the year ending 30 June 2021 but 21% in future years.
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