Question
B. Serba Mantul Bhd (SMB) produces coffee makers machine named Mantop Espresso Machine (MEM). The Covid-19 pandemic has changed consumer behavior, and demand for
B. Serba Mantul Bhd (SMB) produces coffee makers machine named "Mantop Espresso Machine" (MEM). The Covid-19 pandemic has changed consumer behavior, and demand for the product has increased. SMB reported an increase in sales for the two years (2020-2021). The company provides a two-year warranty for all sales of MEM. The following are the details of sales and warranty claims: 1. 2. 3. 4. Total sales of MEM for year 2020 and 2021 were RM1,200,000 and RM1,900,000, respectively. Total warranty claims in 2021 for MEM that were sold in the previous year was RM120,000. Total warranty claims for the year 202 Iwas RM500,000. It is estimated that the maximum amount of warranty claims for the second year would only be 15% of the current year sales. The accounting year of the company ends on 31 December. REQUIRED: (a) Prepare necessary journal entries to record the warranty claims and provisions for the year 2021. (3 Marks) (b) "Provisions are certain amount allocated toward probable, but not certain, future obligations." Explain when the provisions should be recognized. (2 Marks) C. Stay Safe Bhd (SSB) launched its new product, Super Sanitizer (SS), in January 2021. SSB faced bad publicity when the news went viral that customers suffered skin flea allergy dermatitis due to using SS. The client filed a court action in November 2021, claiming damages of RM150,000. The lawyer had advised SSB that the chances for the client to win the case are possible. The company paid RM5,000 for the lawyer's service fee, including RM3,000 for services to be completed in the year 2022. REQUIRED: Explain the accounting treatment for the above situation regarding: i. Lawsuit of RM150,000; and ii. Professional fees of RM5,000. Justify your answers. (5 Marks)
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