When preparing its interim financial statements for the first quarter of Year 2, Nodal Ltd. recorded a
Question:
When preparing its interim financial statements for the first quarter of Year 2, Nodal Ltd. recorded a provision on an onerous contract. At this date, the expected loss from fulfilling the contract was $25,000, while the cancellation penalty was $30,000. Nodal took partial delivery during the next quarter. At the end of the second quarter, the expected loss from fulfilling the contract was $17,000 while the cancellation penalty was $15,000. Which one of the following represents the total adjustment that Nodal will record in its second quarter, Year 2?
A. Increase the provision by $15,000
B. Increase the provision by $2,000
C. Decrease the provision by $8,000
D. Decrease the provision by $10,000
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw