Economics · Adjusting Events
On 6 March 20X7, a fire occurred in Tingle's factory. Tingle incurred $125,000 in repairs. Believing it was fully insured, $125,000 was recorded as a receivable in the draft financial statements for the year ending 30 April 20X7. In May 20X7, the insurer stated that due to non-compliance, only $12,500 would be reimbursed. What is the correct accounting treatment for the financial year ending 30 April 20X7?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Only a disclosure note is required.
- 2Only an expense of $112,500 should be recognized.
- 3Only a receivable for $12,500 should be recognized.
- 4Both an expense of $112,500 and a receivable for $12,500 should be recognized.✓
Correct answer
Both an expense of $112,500 and a receivable for $12,500 should be recognized.
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