The one thing is everyone confused and even I was confused about it was the 60%. This 60% is the chances that the company will pay the 100,000 not the 60% of 100,000. So 100,000 +10,000 = 110,000
‘Everyone’ is not confused. If you have watched the free lectures first, then there is nothing to be confused about (and the wording of the question is copied from real exam questions).
The $100,000 is probable (between 50 and 95%) and is therefore provided for as an expense. The $10,000 is certain and therefore is again provided for as an expense.
Did you watch the free lectures on this before attempting the test? 🙂
I am confuse about provisions. If there is present obligation e.g any court case as a result of past event and reliable estimate can be made. And lawyers tell that it is likely that opponent will win case and bussiness is likely to pay estimated amount? What should we do?
I am confuse about provisions. If there is present obligation e.g any court case as a result of past event and reliable estimate can be made. And lawyers tell that it is likely that opponent will win case and bussineaa is likely to pay estimated amount? What should we do?
In question 2, item 1 the company gives warranties on its products. The company’s statistics shows that about 6% of sales give rise to a warranty claim. I don’t understand why the answer will be virtually certain but not possible? The company << it is stand for company Q or another company? I am a bit confusing Thanks you
Essentially, the statistics suggest that around 6% of sales will give rise to a warranty claim, not that there is a 6% likelihood that there will be a warranty claim.
It is virtually certain that there will be warranty claims – in the past there always have been warranty claims (about 6% of the sales result in warranty claims). The only relevance of the 6% would be in calculating how much the likely claims would be this year (but that is not asked for) 🙂
Do make sure you do lots of practice – you should buy a Revision Kit from one of the ACCA approved publishers because they have lots of exam-standard questions to practice on.
The probability of have to pay is 60% so the need to provide for 100,000. In addition they will have to pay the lawyers fees of 10,000. So a total of 110,000
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Thank you
Very happy to find a source like this. Thank you!
You are welcome 🙂
The one thing is everyone confused and even I was confused about it was the 60%. This 60% is the chances that the company will pay the 100,000 not the 60% of 100,000. So
100,000 +10,000 = 110,000
‘Everyone’ is not confused. If you have watched the free lectures first, then there is nothing to be confused about (and the wording of the question is copied from real exam questions).
Open tuition is soon helpful,thanks am getng challenged now after this questions,thanks
Thank you for your comment 🙂
in question 4 thought the $100,000 of the customer claim and the $10,000 of the lawyers fee to be contingent liability, why is it an expense?
The $100,000 is probable (between 50 and 95%) and is therefore provided for as an expense.
The $10,000 is certain and therefore is again provided for as an expense.
Did you watch the free lectures on this before attempting the test? 🙂
Please explain why it is expense and not a liability?
It is a liability – that is what ‘provide’ means!
Just like an accrual, it appears as an expense in the SOPL and a liability in the SOFP.
Have you watched the free lectures?
I am confuse about provisions.
If there is present obligation e.g any court case as a result of past event and reliable estimate can be made. And lawyers tell that it is likely that opponent will win case and bussiness is likely to pay estimated amount?
What should we do?
I explain this in my free lectures! It is a contingent liability and if it is ‘probable’ then they will provide for the liability.
I am confuse about provisions.
If there is present obligation e.g any court case as a result of past event and reliable estimate can be made. And lawyers tell that it is likely that opponent will win case and bussineaa is likely to pay estimated amount?
What should we do?
In question 2, item 1 the company gives warranties on its products. The company’s statistics shows that about 6% of sales give rise to a warranty claim.
I don’t understand why the answer will be virtually certain but not possible?
The company << it is stand for company Q or another company?
I am a bit confusing
Thanks you
Essentially, the statistics suggest that around 6% of sales will give rise to a warranty claim, not that there is a 6% likelihood that there will be a warranty claim.
What Roger has written is correct.
It is virtually certain that there will be warranty claims – in the past there always have been warranty claims (about 6% of the sales result in warranty claims). The only relevance of the 6% would be in calculating how much the likely claims would be this year (but that is not asked for) 🙂
If it’s virtually certain then shouldn’t I just include it in liabilities, rather than disclosing a note?
Disregard that. That was the answer. I clicked the wrong button.
No problem 🙂
? hope that in finally F3 exam will do all the questions as I do here.Thanks being helpful and by providing that site
Do make sure you do lots of practice – you should buy a Revision Kit from one of the ACCA approved publishers because they have lots of exam-standard questions to practice on.
In question 3, provision was made as the lawer advice,
In Q 4, i am confuse at provision,
Please explain me Q4, Thx
The probability of have to pay is 60% so the need to provide for 100,000.
In addition they will have to pay the lawyers fees of 10,000.
So a total of 110,000
In question 3 , provision of 3000 is created what about the other 2000 ? should that be disclosed in a note ?
Yes it would.
Making this much simpler with these lectures and questions. I am beginning to feel very excited about this study open. OPEN TUITION!!!!
Thanks for the comment 🙂