SUBJECT: FINANCIAL ACCOUNTING & REPORTING

I NEED ANSWER FOR ALL

Identify how the following situations should be treated in the accounts of the entity at the year end 31 December 2014. All information is at year end 31 December 2014 unless stated otherwise. a. Mama Bhd gives warranties at the time of sale to purchasers of its product to repair or replace any defects within three years from the date of sale. On past experience, it is probable that there will be some claims under the warranties. b. Lai Lai Airline Bhd is required by law to overhaul its aircraft one every three years. The aircraft were purchased a year ago. c. Iskandar Bhd is an oil exploratory company. It causes contamination but cleans up only when required to do so under the laws of the country concerned. One country in which the company operates has had no legislation requiring cleaning up and the company has been contaminating the land in that country for several years. At 31 June 2014, it is virtually certain that a draft of law requiring a clean-up of land already contaminated will enacted shortly. d. Bota Bhd is an oil exploratory company. It operates in a country where there is no environmental legislation. However, the company has a widely published environmental policy in which it undertakes to clean up all contamination that it causes. The company has a record of honouring this published policy. e. A retail store has a policy of refunding purchases by dissatisfied customers, even though there is no legal obligation to do so. Its policy of making refunds is generally known. f. Lazat Bhd catered for a wedding reception in September 2014. Subsequent to the wedding, several people have died of food poisoning. The entity is disputing liability for the case brought against it by the relatives of the dead and its lawyers advise that it is probable that they will not be found liable. Identify how the following situations should be treated in the accounts of the entity at the year end 31 December 2014. All information is at year end 31 December 2014 unless stated otherwise. a. Mama Bhd gives warranties at the time of sale to purchasers of its product to repair or replace any defects within three years from the date of sale. On past experience, it is probable that there will be some claims under the warranties. b. Lai Lai Airline Bhd is required by law to overhaul its aircraft one every three years. The aircraft were purchased a year ago. c. Iskandar Bhd is an oil exploratory company. It causes contamination but cleans up only when required to do so under the laws of the country concerned. One country in which the company operates has had no legislation requiring cleaning up and the company has been contaminating the land in that country for several years. At 31 June 2014, it is virtually certain that a draft of law requiring a clean-up of land already contaminated will enacted shortly. d. Bota Bhd is an oil exploratory company. It operates in a country where there is no environmental legislation. However, the company has a widely published environmental policy in which it undertakes to clean up all contamination that it causes. The company has a record of honouring this published policy. e. A retail store has a policy of refunding purchases by dissatisfied customers, even though there is no legal obligation to do so. Its policy of making refunds is generally known. f. Lazat Bhd catered for a wedding reception in September 2014. Subsequent to the wedding, several people have died of food poisoning. The entity is disputing liability for the case brought against it by the relatives of the dead and its lawyers advise that it is probable that they will not be found liable