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In part b
regarding effect of hurricane
1)I didnt understand the right treatment to be done here/how to deal with this situation
Do we have to recognize what the insurance comp pay (12.5 m) in advance in p/l as contingent asset?
and also recognie impairement loss in same year of (25 m)
Could u clarrify my misunderstanding it in simple way plz
2) what about the remaining balance the will be paid when complete the work how to deal w it
What version of the exam are you talking about? International doesn’t have a part (b).
Yes sir am talking about international version
As stated in the topic of this page
Past papser of september/decemeber 17
Question 1 part b
Question name dove and co
Thank u v much
Sorry. Looked in wrong place.?
Customers: for current guests there will be a liability and cost to estimate in moving customers.
Future bookings: no revenues should have been recognised yet and deposits will be recognised as deferred income in the SOFP. For those wno opt to be booked elswhere, the company will probably incur higher costs and this is a present obligation to be recognised.
All of the above imply adverse cash flows that might be difficult to meet, so a potential going concern problem.
Hotels: as stated in the answer, hotels have to be impaired. For example:
Dr Impairment cost 25m
Cr PPE 25mIf 50% of the damage is covered by insurance and is payable in ADVANCE, then also
Dr Insurance company 12.5m
Cr Impairment cost 12.5mIf the compensation is not payable in advance the second journal is inappropriate. A note, however, would be appropriate explaining insurance was expected.
Again there will be strain on cash flows.
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