Question
QUESTION 2 (12 marks) Identify whether each of the following would be classified as a liability, a provision, a contingent liability, or none of these
QUESTION 2 (12 marks) Identify whether each of the following would be classified as a liability, a provision, a contingent liability, or none of these in the financial statements of Natives Investment as at 28 February 2018, their financial year end. The companys financial statements are authorised for issue on 30 May 2018. For each case justify your position with a brief explanation. (a) An amount of N$20 000 owing to Printex Ltd for printing services rendered during May 2017. (2 marks) (b) Long service leave, estimated to be N$500 000, owing to employees in respect of past services. (2 marks) (c) Cost of N$26 000 estimated to be incurred for relocating an employee, Job, from Windhoek head office to the Oshakati branch. The employee will be relocated in August 2018. (2 marks) (d) Provision of N$50 000 for the overhaul of a machine. The overhaul is needed every five years and the machine was five years old as at 28 February 2018. (2 marks) (e) Damages awarded against the company resulting from a court case decided on 28 February 2018. The judge has announced that the amount of damages will be set at a future date, expected to be in September 2018. The company has received advice from its lawyers that the amount of the damages could be anything between N$20 000 and N$7 million. (2 marks) (f) A company is currently a tenant of a property and is due to vacate it in five years time. There is a clause in the tenancy relating to dilapidation work which must be undertaken before the property is vacated. In addition, there is also a clause which enables the landlord to recharge the tenant for costs related to repairing the fabric of the building. In this regard, the landlord is intending to replace the cladding on the building and is obtaining quotes for this work. (2marks)
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