Question: Dear tutors pls answer question 6 below based on the marks Limau Bhd has a financial year ending 31 December. Required: Advise Limau Bhd, in

Dear tutors pls answer question 6 below based on the marks
 Dear tutors pls answer question 6 below based on the marks

Limau Bhd has a financial year ending 31 December. Required: Advise Limau Bhd, in accordance to MFRS 137 Provisions, Contingent Liabilities and Contingent Assets, how the following situations should be accounted for as at 31 December 2021. (a) During the financial year 2021, Limau Bhd sued its main supplier for RM1.5 million damages for faulty supply of materials which had affected its production. As at reporting date, the legal advice is that it is probably that Limau Bhd will win the case. (5 marks) (b) Limau Bhd operates a factory in a foreign country where there is no environmental legislation requiring entities to provide for the cost of environmental clean-up. In 2021, the factory operations caused a serious threat to the ecosystem of a nearby river and the probably clean-up cost was estimated to be RM10 million. Limau Bhd was publicly acclaimed as a socially and environmentally responsible corporate citizen. (5 marks) (c) Limau Bhd sold goods with a warranty where customers are covered for cost of repairs due to manufacturing defects within the first year after purchase. If major defects were detected in all products sold, repair costs of RM2 million would result. Limau Bhd estimated that the probability of goods sold with major defects will be 25%. (5 marks) (d) Limau Bhd was sued by a customer for RM3 million for breach of contract. Limau Bhd had obtained legal opinion that it was not probable Limau Bhd would lose the case. Accordingly, Limau Bhd had provided RM400,000 which was included in administration expenses. The unrecoverable legal costs of defending the action were estimated at RM500,000. However this amount had not been provided for as the legal action would only go to court in 2022

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