SFX Ltd provides musical, stage and sound equipment such as microphones, instruments, speakers and smoke machine etc. SFX Ltd both sells and leases this equipment to venues and musicians and provides other related services. The accountant of SFX Ltd is currently preparing its financial report for the year ended 30 June 2022. The company is a reporting entity. The report will be authorised for publication on 30 September 2022. NOTE: You need to consider each event or transaction separately. Journal entries and actual disclosure notes are NOT required. Unless specifically requested, you are NOT required to quote accounting standard section number and paragraph numbers, but you should identify the relevant accounting principles from the accounting standards, where applicable.
SFX Ltd provides musical, stage and sound equipment such as microphones, instruments, speakers and smoke machine etc. SFX Ltd both sells and leases this equipment to venues and musicians and provides other related services. The accountant of SFX Ltd is currently preparing its financial report for the year ended 30 June 2022. The company is a reporting entity. The report will be authorised for publication on 30 September 2022. NOTE: You need to consider each event or transaction separately. Journal entries and actual disclosure notes are NOT required. Unless specifically requested, you are NOT required to quote accounting standard section number and paragraph numbers, but you should identify the relevant accounting principles from the accounting standards, where applicable.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:SFX Ltd provides musical, stage and sound equipment such as microphones, instruments,
speakers and smoke machine etc. SFX Ltd both sells and leases this equipment to venues and
musicians and provides other related services. The accountant of SFX Ltd is currently preparing
its financial report for the year ended 30 June 2022. The company is a reporting entity. The
report will be authorised for publication on 30 September 2022.
NOTE: You need to consider each event or transaction separately. Journal entries and actual
disclosure notes are NOT required. Unless specifically requested, you are NOT required to
quote accounting standard section number and paragraph numbers, but you should identify
the relevant accounting principles from the accounting standards, where applicable.
PART 1
OTHER DISCLOSURE ISSUES
I
On 2 August 2022, the directors of SFX Ltd were advised the brand of microphone that it sells
and also hires to its customers, were to be banned for sale in Australia from 1 September
2022. This brand of microphones had been tested and found to contain lead in some internal
components (this may cause health problems with prolonged use). As a result, SFX Ltd will
need to dispose of (destroy) all of the microphones that it has in inventory after 1 September
(this accounts for 12% of the total inventory cost) and replace these with a more expensive
brand. Microphones are one of the most common items that SFX Ltd provides to its customers.
REQUIRED
Explain, with reasons, how and where each of the following events/transactions would be
treated, recognised and/or disclosed in the financial statements of SFX Ltd for the year ended
30 June 2022.
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