1. Which ONE of the following would require a provision for a liability to be created by BW at its reporting date of 31 October 2019? * (2 Points) BW makes refunds to customers for any goods returned within 30 days of sale, and has done so for many years. At the date, BW is negotiating with its insurance provider about the amount of an insurance claim that it had filed. On 20 November 2019, the insurance provider agreed to pay $200,000. The government introduced new laws on data protection which come into force on 1 January 2020. BW's directors have agreed that this will require a large number of staff to be retrained. At 31 October 2019, the directors were waiting on a report they had commissioned that would identify the actual training requirements. A customer is suing BW for damages alleged to have been caused by BW's product. BW is contesting the claim and, at 31 October 2019, the directors have been advised by BW's legal advisers it is very unlikely to lose the case. Required 1. Which ONE of the following would require a provision for a liability to be created by BW at its reporting date of 31 October 2019?* (2 Points) BW makes refunds to customers for any goods returned within 30 days of sale, and has done so for many years. At the date, BW is negotiating with its insurance provider about the amount of an insurance claim that it had filed. On 20 November 2019, the insurance provider agreed to pay $200,000. The government introduced new laws on data protection which come into force on 1 January 2020. BW's directors have agreed that this will require a large number of staff to be retrained. At 31 October 2019, the directors were waiting on a report they had commissioned that would identify the actual training requirements. A customer is suing BW for damages alleged to have been caused by BW's product. BW is contesting the claim and, at 31 October 2019, the directors have been advised by BW's legal advisers it is very unlikely to lose the case. 12:10 Teams sal 3G A forms.office.com 2. Which of the following lists consists of items that would be added to net profit before taxation in the calculation of net cash from operating activities under the indirect method according to IAS 7? (2 points) Decrease in inventories, depreciation profit on sale of non-current assets. Loss on sale of non-current assets, depreciation, increase in trade receivables. Decrease in trade receivables, increase in trade payables, profit on sale of non-current assets. Decrease in trade receivables, increase in trade payables, loss on sale of non-current assets. 3. Target Co is preparing its financial statements for the year ended 30 September 2019. The company is facing a number of legal claims from its customers with regards to a faulty product sold. The total amount being claimed is $3.5 million. The company's lawyers say that the customers have an 80% chance of being successful. Per IAS 37 Provisions, Contingent Liabilities and Contingent Assets, what amount, if any, should be recognised 12:10 Teams sal 3G AA forms.office.com 3. Target Co is preparing its financial statements for the year ended 30 September 2019. The company is facing a number of legal claims from its customers with regards to a faulty product sold. The total amount being claimed is $3.5 million. The company's lawyers say that the customers have an 80% chance of being successful. Per IAS 37 Provisions, Contingent Liabilities and Contingent Assets, what amount, if any, should be recognised in respect of the above in Target Co's statement of financial position as at 30 September 2019? (2 points) $3.5 million No amount should be recognised $0.7 million $2.8 million 4. A vehicle was involved in an accident exactly halfway through the year. The vehicle cost $10,000 and had a remaining life of 10 years at the start of the year. Following the accident, the expected present value of cash flows associated with the vehicle was $3,400 and the fair value less costs to sell was $6,500. What is the recoverable amount of the vehicle 12:10 all 3G AA forms.office.com 7. On 1 October 2018, Xplorer commenced drilling for oil from an undersea oilfield. The extraction of oil causes damage to the seabed which has a restorative cost (ignore discounting) of $10,000 per million barrels of oil extracted. Xplorer extracted 250 million barrels of oil in the year ended 30 September 2019. Xplorer is also required to dismantle the drilling equipment at the end of its five-year licence. This has an estimated cost of $30 million on 30 September 2023. Xplorer's cost of capital is 8% per annum and $1 has a present value of 68 cents in five years' time. What is the total provision (extraction plus dismantling) which Xplorer would report in its statement of financial position as at 30 September 2019 in respect of its oil operations? (2 Points) $34,900,000 $4,132,000 $24,532,000 $22,900,000 8. On 1 April 2020 Chan Ltd sells an item of plant to a finance company and leases it back for a period of five years, at the end of which the fair value of the plant is estimated to be nil. 12:10 all 3G AA forms.office.com 8. On 1 April 2020 Chan Ltd sells an item of plant to a finance company and leases it back for a period of five years, at the end of which the fair value of the plant is estimated to be nil. Which of the following represents the correct accounting treatment for this transaction? (2 points) Revalue the plant to the value of the sale proceeds, treat the sale proceeds as a financial liability Ignore the disposal, treat the sale proceeds as a financial liability Spread the profit on disposal over five years, capitalise the new lease at the present value of the lease payments Recognise the profit on disposal in the current year, capitalise the new lease at the present value of the lease payments 9. Using the requirements set out in IAS 10 Events after the Reporting Period, which of the following would be classified as an adjusting event after the reporting period in financial statements ended 31 March 2019 that were approved by the directors on 31 August 2020? (2 points) A