As at 30 June 2018, Montford Ltd has assets of $18 million, liabilities of $12 million,

ordinary share capital of $4 million and retained earnings of $2 million. The company’s

revenue from ordinary activities for 2017–2018 is $36 million and the net profit is

$1.6 million. As the accountant for Montford Ltd you are reviewing, on 20 August 2018,

the following events which occurred after the end of the reporting period:

(a) On 18 July 2018, one of Montford’s three warehouses was destroyed by fire. The

estimate of damage is $950 000.

(b) On 20 July 2018, the following judgement against Montford Ltd was handed down

in the Supreme Court of Victoria: that the defendant pay $275 000 to Roundhay Ltd.

Explain how these events would be accounted for in accordance with the requirements

of AASB 110 ‘Events after the Reporting Period’. (LO3)