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You have been asked to advise Kimeu on the appropriate accounting treatment for the following situations arising in the books of various companies. The year end in each case can be taken as 30 April 2018 and you should assume that the amounts involved are material. Required: For each of the situations below, outline the accounting treatment you would recommend and give the reasoning principles involved. a) At the year-end there was a debit balance in the books of a company for 150,000 representing an estimate of the amount receivable from an insurance company for an accident claim. In May 2018 before the directors had agreed on the final draft of the published accounts, the amount of the claim was finally settled as 186,000. (4 marks) b) A company has an item of equipment which cost 4,000,000 in 2016 and was expected to last for ten years. At the beginning of the year ended 30 April 2018 the book value was 2,800,000. It is now thought that the company will soon cease to make the product for which the equipment was specifically purchased. Its recoverable amount is only 800,000 at 30 April 2018.
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