Question 2 (25 marks)
part i
(a) describe "notes to the financial statements". identify what is the accounting concept that
support for preparing the notes.
(3 marks)
(b) refer to question 1 of always fit company and assume the company's financial statements
were issued on march 25, 2019. state “yes” or “no” whether situation (1) to (4) below
require disclosure with the financial statements. if“yes”, identify the nature of disclosure. if
“no”, give the reason to support.
(1) on february 28, 2019, there was serious water leakage problem in several studio
classrooms. it was expected to take three months for repair.
(2) the information about the lender, the interest rate and the repayment schedule of the notes
payable.
(3) a customer fell down in studio's toilet and his arm was seriously injured and the company
was sued by the customer for medical compensation of $100,000 in 2018. the hearing date
is fixed on april 25, 2019.
(4) on february 27, 2019, the company's accountant found $300 cash was stolen by a part-
time staff.
(12 marks)