BKAR1013 FINANCIAL ACCOUNTING AND REPORTING I (A211)
MINI CASE 10:
PROVISION & CONTINGENT LIABILITY
DUE DATE: 15 JANUARY 2022: BEFORE 12 MID NIGHT
Guidelines for submission:
1) Please answer all questions.
2) Please write your name, matric number, lecture group on the header and page number
on the bottom of your answer document.
3) The mini case is an individual task, however discussion is allowed, but copying other
student’s answer is forbidden.
4) Your answer should be handwritten and subsequently scanned with a scanner or mobile
scanner apps in a combined PDF file. The scanned document must be clear, easily
readable and complete. Photo is not allowed.
5) Submit your scanned answer via Online Learning portal →
within
the allotted time and period, before 15 January 2022 before 12.00 mid night. Only one
submission will be accepted.
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QUESTION 1
Beauty products sold by Tradisi Berseri Bhd (TRADISI) are in boxes of RM10 per box. TRADISI
includes one coupon in each box sold. In return for 4 coupons, customers receive a tote bag that
the company purchases for RM2.20 each. TRADISI's experience indicates that 60 percent of the
coupons will be redeemed. During 2020, 100,000 boxes of beauty products were sold, 12,000 tote
bags were purchased, and 40,000 coupons were redeemed. During the first quarter of 2021,
RM70,000 of beauty products were sold and 2,000 coupons were redeemed. The coupons are valid
for two (2) years.
REQUIRED:
(a)
Prepare the journal entries in relation to the provision liability that should be recorded
by Tradisi Berseri Bhd in its first quarter of the year 2021.
(b)
Determine the premium liability that should be reported by Tradisi Berseri Bhd as at
it first quarter of 2021.
.
QUESTION 2
Presented below are two independent cases of MAA Bhd:
Case 1:
On 15 October 2019, the board of directors of MAA Bhd decided to close down one of its
overseas divisions due to continuous losses. For this reason, a detailed plan was drafted and all
costs associated to this closure have been estimated. Besides that, the decision was
communicated to all of those affected including notices to the staff of the division. The
company’s accounting period ends on 31 December.
Case 2:
On 20 November 2019, Aqeem Enterprise filed a lawsuit of breach of contract against MAA
Bhd for RM2.5 million. Based on the recent evidence obtained by the company’s legal advisor,
it is believed that the realisation of liability from this claim is reasonably possible. The
company’s accounting period ends on 31 December.
REQUIRED:
(a) Based on the MFRS 137 Provisions, Contingent Liabilities and Contingent
Assets,
discuss the appropriate treatment for each of the above cases by MAA
Bhd for the
year 2019.
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(b) State THREE (3) situations where contingent liabilities should not be recognised in the
financial statements based on Paragraph 13 of MFRS 137 Provisions, Contingent
Liabilities and Contingent Assets.
QUESTION 3
SNM Bhd offers coupons to its customers in an effort to increase its annual sales. The company
places 1 coupon in each packet of Product A. Customers can exchange 10 coupons for 1 decorative
clock. In 2018, SNM Bhd purchases in cash 2,500 units of decorative clock at RM10.00 each. The
company also sold 50,000 units of Product A at a price of RM20.00 each. SNM Bhd estimated that
40% of the coupons will be redeemed. As of 31 December 2018, only 15,000 coupons were
presented for redemption.
REQUIRED:
(a)
Prepare the necessary journal entries for SNM Bhd during the year 2018. Please show your
calculations.
(b)
Determine the asset and liability that relate to the above transactions that would appear on
31 December 2018 Statement of Financial Position.
End of Questions
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