Question
A customer of Pluto Co claims that, on 25 August 20X8, a fault in a product sold by Pluto caused damage to its production line.
A customer of Pluto Co claims that, on 25 August 20X8, a fault in a product sold by Pluto
caused damage to its production line. The customer is claiming damages of $150,000. Pluto
has accepted liability but offered to pay $80,000 to repair the damage. The customer has
refused this offer. The matter will be settled in a court case which is scheduled for December
20X9. Plutos legal representative has indicated that the court is highly likely to accept the
customers claim for $150,000.
How should this matter be dealt with in Plutos financial statements for the year to 30
September 20X8?
a.As a non-current liability of $80,000
b.As a non-current liability of $150,000
c.As a current liability of $80,000
d. As a current liability of $150,000
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