QUESTION 1

1. Presented below are two independent cases:

Case 1:

Kijol Tuna Bhd is a company that produces and sells herbs-based supplement products. The company is the leading company in its business line and make regular promotion in media which make the company well-known. Its motto Satisfy with our product, let the world knows. Unsatisfied with our product, let us know and we refund your money is generally known by consumers.

Case 2:

Golden Bath is a new product of Helsyanki Bhd. The company has nationally promoting the product to the consumers. Helsyanki Bhd is operating in Country Y which does not put any legal obligation for a company to pay compensation on any return by consumers. In addition, Helsyanki Bhd, which is in its 3^rd year of operation, has not established a pattern of practice or published policies that show it will accept certain responsibilities on any products produce by the company.

REQUIRED:

Based on MFRS 137 Provisions, Contingent Liabilities and Contingent Assets explain the accounting treatment practices that should be taken in each of the cases in accordance to the MFRS 137 Provisions, Contingent Liabilities and Contingent Assets. Provide your justifications.

2. Nebron Computer Bhd sells computers for RM2,500, which includes a 3 year warranty that requires company to perform periodic services and to replace defective parts. During 2018, Nebron sold 500 computers by cash. The company has estimated the total 3 year warranty costs at RM250 (RM100 for labour costs and RM150 for spare parts). Assume that all the computer sales occur on 31 December 2018. In 2019, the company incurred actual warranty expense in relative to the 2018 sales of RM12,500 for parts and RM18,750 for labour costs.

REQUIRED:

1. Prepare the necessary journal entries for 2018 and 2019.

2. Determine the balance of warranty liabilities as at 31 December 2019. Show your calculations.