Problem
Adapted from Loftus et al (2023), Chapter 19
The following information has been made available to you to assist in the preparation of the financial statements of Alice Ltd for the year ended 30 June 2023. The statements will be authorised by directors on 28 August 2023.
• The company has been involved in a dispute with a government environment agency relating to the release of waste from its manufacturing plant in May 2023. An expert investigation was conducted to determine if the company was at fault. The draft financial report only discloses a contingent liability in the notes detailing the investigation and estimating the potential damages at $1 million. The investigator's report, released on 1 August 2023, found Alice Ltd to be responsible for the release and damages amounting to $1.5 million were payable by the company.
a) Credit notes totalling $75,000 were recorded as June 2023 sales but were in fact sales made in July 2023.
b) Based on expert advice provided to Alice Ltd in 2023, it was decided the headquarters' building should be depreciated over a total period of 20 years. The building had been purchased on 1 July 2017 for $12,500,000 with an estimated life of 25 years and a residual value of nil. Alice Ltd uses the straight-line method of depreciation.
At 1 July 2022, details for the building were as follows.
Cost 12,500,000
Accumulated depreciation (2,500,000)
Carrying amount 10,000,000
Task
In relation to the above events or transactions, identify whether this is a: change in accounting policy, change in estimate, an error, or an after reporting date event. Prepare the necessary notes or general journal entries to comply with applicable accounting standards.