The ordinance of TCI requires businesses to install smoking rooms to its factories by 30 December 2020. The entity has not installed the smoking rooms. Should a provision be recognised at the end of the reporting period? a) 31 December 2019 b) 31 December 2020
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The ordinance of TCI requires businesses to install smoking rooms to its factories by 30 December 2020. The entity has not installed the smoking rooms.
Should a provision be recognised at the end of the reporting period?
a) 31 December 2019
b) 31 December 2020
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- Chaos Ltd. has been served a legal notice on December 15, 2019, by the local environmental protection agency (EPA) to fit smoke detectors in its factory on or before June 30, 2020. The cost of fitting smoke detectors in its factory is estimated at € 250,000. How should Chaos Ltd. treat this in its financial statements for the year ended December 31, 2019?Jack Limited, a newly formed company has requested you as a financial consultant for advice on how to account for provisions, contingent liabilities and contingent assets. The company’s year-end is 31 December. REQUIRED The financial controller of Jack Limited has asked you to prepare a brief report which addresses the following: In accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, discuss the recognition criteria for the following: (i) A provision (ii) A contingent liability (iii) A contingent assetMESA gives warranties at the time of sale to purchasers of its product. Under the terms of the contract for sale MESA undertakes to make good, by repair or replacement, manufacturing defects that become apparent within one year from the date of sale. On the basis of experience, it is probable (i.e. more likely than not) that there will be some claims under the warranties. At 31 December 2021, MESA appropriately recognized P50,000 warranty provision. MESA incurred and charged P140,000 against the warranty provision in 2022. P80,000 of this related to warranties for sales made in 2022. The increase during 2022 in the discounted amount recognized as a provision at 31 December 2022 arising from the passage of time is P3,000. At 31 December 2022, MESA, estimated that it would incur expenditures in 2023 to meet its warranty obligations at 31 December 2022, as follows: 5 per cent probability of P400,000 20 per cent probability of P200,000 50 per cent probability of P20,000 25 per cent…
- ABC Company requires refundable advance payments with special orders formachinery constructed to customer's specifications. Information for 2021 is as follows:Customer advances - balance, December 31, 2020: P 885,000Advances received with orders in 2021: P1,380,000Advances applied to orders shipped in 2021: P1,230,000Advances applicable to orders cancelled in 2021: P375,000What amount should ABC Company report as current liability for customer'sdeposits in December 31, 2021 statement of financial position?Tokwa Inc. requires advance payments with special orders for machinery constructed to the customer specifications. Information are as follows: • Customer Advances - Balance December 31, 2020- P118,000 • Advances received with orders in 2020- P184,000 • Advances applied to orders shipped in 2020- P164,000 • Advances applicable to orders canceled in 2020- P50,000 How much should be reported as a current liability for advances from customers on December 31, 2019?IFRS 15 – Revenue from Contracts with Customers – was issued in September 2015 and applies to accounting periods beginning on or after 1 January 2018. IFRS 15 replaces IAS 11 –Construction Contracts – and IAS 18 – Revenue. IFRS 15 contains principles which underpin the timing of the recognition of revenue from contracts with customers and the measurement of that revenue.Required:Explain the principles underpinning the TIMING of revenue recognition and the MEASUREMENT of that revenue which are outlined in IFRS 15. You should provide examples of revenue transactions to support your explanations of these key principles.
- Academic journals on Following extensive consultation, the International Accounting Standards Board (IASB) issued IFRS 16 ‘Leasing’ which superseded IAS 17. Full adoption of the new leasing standard was required by all affected companies from January 2019.14. Humanizer Company gives warranties at the time of sale to purchasers of its product. Under the terms of the sale, the entity undertakes to make good, by repair or replacement, manufacturing defects that become apparent within one year from the date of sale. On December 31, 2011, the entity appropriately recognized P50,000 warranty provision. The entity incurred and charged P140,000 against the warranty provision in 2012. Out of the P140,000, an amount of P80,000 related to warranties for sales made in 2012. The increase during 2012 in the discounted amount recognized as a provision on December 31, 2011 arising from the passage of time is P2,000. On December 31, 2012, the entity estimated that it would incur expenditures in 2013 to meet its warranty obligations on December31, 2012 as follows: 5% probability of P400,000; 20% probability of P200,000; 50% probability of P 80,000; 25% probability of P20,000. Assume for simplicity that the 2013 cash flows for warranty repairs and…14. Humanizer Company gives warranties at the time of sale to purchasers of its product. Under the terms of the sale, the entity undertakes to make good, by repair or replacement, manufacturing defects that become apparent within one year from the date of sale. On December 31, 2011, the entity appropriately recognized P50,000 warranty provision. The entity incurred and charged P140,000 against the warranty provision in 2012. Out of the P140,000, an amount of P80,000 related to warranties for sales made in 2012. The increase during 2012 in the discounted amount recognized as a provision on December 31, 2011 arising from the passage of time is P2,000. On December 31, 2012, the entity estimated that it would incur expenditures in 2013 to meet its warranty obligations on December31, 2012 as follows: 5% probability of P400,000; 20% probability of P200,000; 50% probability of P 80,000; 25% probability of P20,000. Assume for simplicity that the 2013 cash flows for warranty repairs and…
- ABC Corp. is engaged in the manufacture and sale of facemasks. To increase sales, the marketing arm of the Company entered into consignment agreements with third parties. Inday. a consignee received the facemasks on March 1, 2021. If unsold, VAT shall accrue on: O April 29, 2021 O May 1, 2021 O April 30, 2021 O No VAT shall accrueWhen an entity has a continuing policy of guaranteeing new products against defects for three years, the liability arising from the warranty A. Should be reported as part current and part noncurrentB. Should be reported as noncurrentC. Should be reported as current.D. Need not be disclosed.3. Determine the implication of the following independent cases to the December 31, 2020financial statements as per PAS 37, on Provisions, Contingent Liabilities, and ContingentAssets.Case 1On December 5, 2020, an employee filed a P3,000,000 lawsuit against Lance Company fordamages suffered when one of the company’s equipment malfunctioned in August, 2020.In your inquiry of the company’s legal counsel, the legal counsel expects the company willlose the lawsuit and estimates the losses to be between P500,000 and P1,500,000. Theemployee has offered to settle the lawsuit out of court for P1,200,000, but Lance Companywill not agree to the settlement.Case 2Lance Company has guaranteed a loan of P2,000,000 of one of its key officers from a bankin 2020. By the time the financial statements of Lance Company were approved forissuance by its BOD, it is clear that the key officer is in financial difficulties and it is probablethat Lance Company will meet the guarantee.Case 3On December 20, 2020,…