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Boston m/j 16 part iii

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Boston m/j 16 part iii

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by Kim Smith.
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  • August 1, 2018 at 10:36 pm #465574
    zkaay
    Participant
    • Topics: 212
    • Replies: 98
    • ☆☆☆

    1) “One of Boston Co’s largest customers, Cleveland Co, is experiencing financial difficulties”

    Does this gives a clue the difficulties if customer appearing during the audit ( so bef the ye)?

    2) “At the year end Cleveland Co owed Boston Co $100,000, against which Boston Co made a 5% specific allowance”

    Does allowance made only if customer is facing financial difficulty?

    3) “Shortly after the year end Cleveland Co paid $30,000 of the outstanding amount due but has since experienced further problems”

    What does “but has since experienced further problems” reffer to?

    Since ye or since after ye when he paid 30,000

    4)“leading to their primary lender presenting a formal request that Cleveland Co be liquidated”

    Could explain whats happening here?

    I appreciate answering the q bit by bit so i can underatand this question clearly

    Thanks v much

    August 2, 2018 at 8:04 am #465702
    Kim Smith
    Keymaster
    • Topics: 134
    • Replies: 8304
    • ☆☆☆☆☆

    1) If a customer becomes insolvent or similar after the y/e you should always assume that the financial difficulties existed at the y/e regardless of whether or not the audit client was aware of the difficulties.
    2) A specific allowance can be made for any amount that may be irrecoverable – it could just be a matter of a disputed invoice.
    3) “Shortly after the year end Cleveland Co paid $30,000 of the outstanding amount due” … this couldn’t be expressed more clearly
    “… but has since (i.e. after it paid this amount) [the customer] experienced further [financial] problems”
    4) Cleveland’s bank or other lender is proposing to liquidate the company/have it wound up/declared insolvent [you should know these terms from F4 Law).

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