At 30 September 20X3, Bowtock had included in its draft statement of financial position inventory…

At 30 September 20X3, Bowtock had included in its draft statement of financial position inventory $250 000 valued at cost. Up to 5 November 20X3, Bowtock had sold $100 000 of this inventory for $150 000. On this date, new government legislation (enacted after the year-end) came into force which meant that the unsold inventory could no longer be marketed and was worthless.

Bowtock is part way through the construction of a housing development. It has prepared its financial statements to 30 September 20X3 in accordance with IAS 11, Construction Contracts, and included a proportionate amount of the total estimated profit on this contract. The same legislation, referred to above (in force from 5 November 20X3), now requires modifications to the way the houses within this development have to be built. The cost of these modifications will be $500 000 and will reduce the estimated total profit on the contract by that amount, although the contract is still expected to be profitable.

Required:

Assuming the amounts are material, state how the information above should be reflected in the financial statements of Bowtock for the year ended 30 September 20X3.