IAS 10 Events after the Reporting Period:
ABC’s statement of profit or loss showed a profit before tax of $2 million. After the end of the reporting period and before the financial statements were authorized for issue, the following events took place.
- A customer who owed $100,000 at the year end went bankrupt owing a total of $150,000.
- Inventory valued at $120,000 in the statement of financial position was sold in year-end condition for $100,000.
- Loss of inventory due to a flood of $50,000.
Required:
What is the company’s profit before tax after making the necessary adjustments for these events?
Solution:
| Profit before tax | 2,000,000 | |
| Bad debt write off | (100,000) | |
| Loss on inventory | (20,000) | |
| Adjusted profit before tax | 1,880,000 |