Continuing with Example 3. If in case the each scooter can raise only one claim during the period of three year. During the year 2010–11, 350 scooters were repaired at a cost of ₹2,700 each and another 150 were replaced at a cost of ₹6,200 each. Show how subsequent measurement of these provisions should be made in the year 2010–11.

Data from Example 3

The manufacturer of automatic gear scooters gives a warranty of three years on every scooter for the repair or replacement of the scooters that fail to perform as per the specification. The past experience reveals that on an average 7% of the scooters require repair costing ₹4,000 each and another 3% require replacement costing ₹7,000 each. During the year 2009–10, the company sold 26,000 scooters. Show how provision is to be recognized in the annual accounts.