Question

You are an expert who deals with the transactions related to provisions, contingent assets, contingent liabilities and intangible assets. For each of the scenario mentioned below provide with: appropriate solution with accounting treatment, calculations and necessary comments: (4 x 2.5 inarks each - 10 marks) 1. ABC SAOG has a written policy to meet proven environmental claims without going to court. The company already have a liability for environmental damage from a court case that is still in progress at the balance sheet date. The lawyer has estimated a 70% probability that the company may be held liable for the claim of RO 90,000 2. The company also sells goods with a warranty covering customers for the cost of repairs of any defects that are discovered within the first two months after purchase. Past experiences suggest that 90% of the goods sold will have no defects, 5% will have minor defects and 5% will have major defects. If minor defects were detected in all products sold the cost of repairs would be RO 60,000, if major defects were detected in all products sold, the cost would be RO 300,000 3. The company has issued shares of 60,000 shares of RO 1.000 each to buy a copyright The original cost of the copyright is RO 60,000. The market value of such shares issued are RO 1.500 each 4. Also, the company had a trademark with carrying value of RO 8 million which it exchanged for a similar trademark with a market price of RO 10 million.

Answer 1