Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

QUESTION 7 Entity A is the top producer of oil. On 1 October 2022, Entity A commenced drilling for oil from an undersea oilfield.

QUESTION 7 Entity A is the top producer of oil. On 1 October 2022, Entity A commenced drilling for oil from

QUESTION 7 Entity A is the top producer of oil. On 1 October 2022, Entity A commenced drilling for oil from an undersea oilfield. The extraction of oil causes damage to the seabed which has a restoration cost of $25,000 per million barrels of oil extracted. Entity A extracted 150,000,000 barrels of oil in the year ended 30 September 2023. Entity A is also required to dismantle the drilling equipment at the end of its five-year licence. This has an estimated cost of $30,000,000 on 30 September 2027. Entity A's cost of capital is 10.00%. REQUIRED: How much is the provision liability which Entity A would report in its statement of financial position on 30 September 2023 in respect of its oil operations? ANSWER: The provision liability is $ as at the end of the reporting period. QUESTION 8 Entity A is being sued by a customer for $5,000,000 for breach of contract over a cancelled order. Entity A has obtained a legal opinion that there is a 20% chance that Entity A will lose the case. Therefore, Entity A has prepared to provide $1,000,000 in respect of the claim at the end of the reporting period. The unrecoverable legal costs of defending the action are estimated at $100,000. These have not been provided for as the case will not go to court until next year. REQUIRED: What is the amount of the provision that should be made by Entity A in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets? ANSWER: The provision liability is S as at the end of the reporting period.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

I unfortunately cannot provide a detailed answer to these questions as the image contains text that ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Financial Reporting a practical guide

Authors: Alan Melville

8th Edition

1292439424, 978-1292439426

More Books

Students also viewed these Accounting questions

Question

Do you have a family? Do you intend to have a family?

Answered: 1 week ago

Question

Can you tell me about yourself?

Answered: 1 week ago

Question

What is your national origin/ethnicity/ancestry?

Answered: 1 week ago