2. Bubble Candies is being sued by a customer for $2 million for breach of contract over a cancelled order.Bubble Candies has obtained legal opinion that there is a 20% chance that Bubble Candies will lose the case.Accordingly Bubble Candies has provided $400,000 ($2 million x 20%) in respect of the claim. The unrecoverablelegal costs of defending the action are estimated at $100,000. These have not been provided for as the case willnot go to court until next year.What is the amount of the provision that should be made by Bubble Candies in accordance with IAS 37Provisions, Contingent Liabilities and Contingent Assets ?

Existing conditions involving uncertainty that may result in possible gain(gain contingency) or loss…

2. Bubble Candies is being sued by a customer for $2 million for breach of contract over a cancelled order. Bubble Candies has obtained legal opinion that there is a 20% chance that Bubble Candies will lose the case. Accordingly Bubble Candies has provided $400,000 (S2 million x 20%) in respect of the claim. The unrecoverable egal 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. What is the amount of the provision that should be made by Bubble Candies in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets ?

2. Bubble Candies is being sued by a customer for $2 million for breach of contract over a cancelled order. Bubble Candies has obtained legal opinion that there is a 20% chance that Bubble Candies will lose the case. Accordingly Bubble Candies has provided $400,000 (S2 million x 20%) in respect of the claim. The unrecoverable egal 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. What is the amount of the provision that should be made by Bubble Candies in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets ?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter8: Current And Contingent Liabilities

Section: Chapter Questions

Problem 13MCQ

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