a) Warisan Sdn. Bhd. produces chemical products for use in the fertilizer industry. The financial year...

 

Transcribed Image Text:

a) Warisan Sdn. Bhd. produces chemical products for use in the fertilizer industry. The financial year end of the company is 31 December 2020. In the preparation of the financial statement, Mahani, the accountant of Warisan Sdn. Bhd. is attempting to determine the proper accounting treatment for each of the following situations: 1. 2. b) As a result of uninsured accidents during the year, personal injury suits for RM400,000 and RM50,000 have been filed against the company. It is the judgment of Warisan Sdn. Bhd.'s legal counsel that an unfavorable outcome is unlikely in the RM100,000 case but that an unfavorable verdict approximating RM400,000 will probably result in the RM800,000 case. Required: Warisan Sdn. Bhd. plant is uninsurable because of the special risk of injury to employees and losses due to fire explosion. The year 2020 is considered one of the safest in the division's history because no loss due to injury or casualty was suffered. Having suffered an average of six casualties a year during the rest of the past decade (ranging from RM100,000 to RM1,600,000) the management of Warisan Sdn. Bhd. is certain that next year the company will probably not so fortunate. Prepare the journal entries that should be recorded as of 31 December 2020 to recognize each of the situations above. Illustrate what should be reported relative to each situation in the financial statements and accompanying notes. a) Warisan Sdn. Bhd. produces chemical products for use in the fertilizer industry. The financial year end of the company is 31 December 2020. In the preparation of the financial statement, Mahani, the accountant of Warisan Sdn. Bhd. is attempting to determine the proper accounting treatment for each of the following situations: 1. 2. b) As a result of uninsured accidents during the year, personal injury suits for RM400,000 and RM50,000 have been filed against the company. It is the judgment of Warisan Sdn. Bhd.'s legal counsel that an unfavorable outcome is unlikely in the RM100,000 case but that an unfavorable verdict approximating RM400,000 will probably result in the RM800,000 case. Required: Warisan Sdn. Bhd. plant is uninsurable because of the special risk of injury to employees and losses due to fire explosion. The year 2020 is considered one of the safest in the division's history because no loss due to injury or casualty was suffered. Having suffered an average of six casualties a year during the rest of the past decade (ranging from RM100,000 to RM1,600,000) the management of Warisan Sdn. Bhd. is certain that next year the company will probably not so fortunate. Prepare the journal entries that should be recorded as of 31 December 2020 to recognize each of the situations above. Illustrate what should be reported relative to each situation in the financial statements and accompanying notes.

Answer rating: 100% (QA)

Answer a As a result of the uninsured accidents during the year the following journal entries should ... View the full answer