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rember 20X3. Detailed pla roved by the board at this ne current status of each of th

rember 20X3. Detailed pla roved by the board at this ne current status of each of th

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 5 The board of CLH agreed to close down two of its divisions, A and B, at its board meeting on 18 November 20X3. Detailed plans have been formalised for each division's dosure and these were approved by the board at this meeting. The current status of each of the closures is as follows: Division A Letters have been sent to customers warning them to seek an alternative source of supply and a redundancy programme was announced to all staff working in the division on 1 December. The expected costs of dosure are R2.5 million and this includes R450,000 for re-deploying staff to other divisions. Division B The directors want to deal with the closures one at a time and therefore no announcements have yet been made about the closure of division B. The directors are keen to minimise the effect that the dlosures will have on staff working in other divisions and have therefore decided to keep this closure quiet for the moment The expected costs of closure are R1.5 million. All staff are likely to be made redundant and therefore no re-deployment costs are included in this estimate. Required: You have been asked to prepare a memo for the board of directors, briefly explaining the appropriate accounting treatment of the above decisions in the financial statements of CLH for the year ended 31 December 20X3.
Transcribed Image Text:Question 5 The board of CLH agreed to close down two of its divisions, A and B, at its board meeting on 18 November 20X3. Detailed plans have been formalised for each division's dosure and these were approved by the board at this meeting. The current status of each of the closures is as follows: Division A Letters have been sent to customers warning them to seek an alternative source of supply and a redundancy programme was announced to all staff working in the division on 1 December. The expected costs of dosure are R2.5 million and this includes R450,000 for re-deploying staff to other divisions. Division B The directors want to deal with the closures one at a time and therefore no announcements have yet been made about the closure of division B. The directors are keen to minimise the effect that the dlosures will have on staff working in other divisions and have therefore decided to keep this closure quiet for the moment The expected costs of closure are R1.5 million. All staff are likely to be made redundant and therefore no re-deployment costs are included in this estimate. Required: You have been asked to prepare a memo for the board of directors, briefly explaining the appropriate accounting treatment of the above decisions in the financial statements of CLH for the year ended 31 December 20X3.
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