Montague's paint shop has suffered some bad publicity as a result of a customer claiming to be suffering from skin rashes as a result of using a new brand of paint sold by Montague's shop. The customer launched a court action against Montague in November 20X3, claiming damages of $5,000. Montague's lawyer has advised him that the most probable outcome is that he will have to pay the customer $3,000.

What amount should Montague include as a provision in his financial statements for the year ended 31 December 20X3?

Select one:

a. None of the other answers is correct

b. Provision should be 3,000

c. No need to record provision

d. I dont know

e. Provision should be 5,000