Beechy6eVol2 SM Ch12
6363 words 26 pagesChapter 12: Financial Liabilities and Provisions
Case 12-1 Prescriptions Depot Limited 12-2 Camani Corporation Suggested Time Technical Review TR12-1 Provision—Measurement 10 TR12-2 Provision—Warranty 5 TR12-3 Note Payable 5 TR12-4 Discounting—Note Payable 10 TR12-5 Discounting—Provision 10 Assignment A12-1 Common Financial Liabilities 10 A12-2 Common Financial Liabilities—Taxes 20 A12-3 Common Financial Liabilities—Taxes 20 A12-4 Foreign Currency Payables (*W) 10 A12-5 Common Financial Liabilities & Foreign Currency 25 A12-6 Provisions 20 A12-7 Provisions (*W) 20 A12-8 Provisions 20 A12-9 Provision Measurement 15 A12-10 Provision Measurement 15 A12-11 …show more content…
The sale of the product, with a warranty for defects, creates an obligation for the company.
13. No liability will be recorded for coupons that involve a modest decrease in purchase price. The only result of the coupon program is that gross profit will be lower in the period in which the coupons are used. A liability would only be recorded if the coupon program resulted in cash being paid out, or products sold at less than cost. Here, it is assumed that the $14 regular price involves more than $1 of gross profit.
14. The obligation under a self-insurance program is measured as the expected cash to be paid for losses that are filed but not yet settled, plus cash to be paid because of incidents that have taken place but where losses have not yet been discovered. The obligation cannot be inflated to also include expected events that have not yet happened, even if there is a statistical likelihood that such events will occur in the future.
15. A compensated absence is time away from work (represented typically by vacation) given to employees without reducing their salaries or wages. The related expense should be recognized when earned and not when the time is taken off, if the two are different.
16. A two-year receivable is valued as follows:
a) no-interest – at present value of principal, using current market interest rate as the discount factor. b) low-interest – at present value of principal plus (low) interest payments;