Question

QUESTION 3: LIABILITIES, PROVISIONS AND CONTINGENT LIABILITIES (a) Identify, whether each of the following would be a liability, a provision or a contingent liability, or none of the above, in the financial statements of Company A as at the end of its reporting period of 30 June 2016. Assume that Company A's financial statements are authorised for issue on 24 August 2016. i. An amount of $35 000 owing to Company Z for services rendered during May 2016. iabiy ii. Long service leave, estimated to be $500 000, owing to employees in respect of past services. Proisin ili. Costs of $26 000 estimated to be incurred for relocating employee D from Company A's head office location to another city.. The staff member will Cost fuwe physically relocate during July 2016. None of abar iv. Provision of $50 000 for the overhaul of a machine. The overhaul is needed every 5 years and the machine was 5 years old as at 30 June 2016. Nae of obou v. Damages awarded against Company A resulting from a court case decided on 26 June 2016. The judge has announced that the amount of damages will be set at a future date, expected to be in September 2016. Company A has received advice from its lawyers that the amount of the damages could be anything between $20 000 and $7 million. Coboiung (10 marks) (b) On 1 July 2014 Jango Limited issued $1 million in six year debentures that pay interest every six months at a coupon rate of 26. At the time of issuing the arket required a rate of return of 46. c00 Tems secu ibbA 29. Required: (2 marks) i. Determine the issue price. ii. Complete the amortisation schedule in the yellow answer booklet for the six year period the debentures were issued for. (5 marks) Provide the journal entries for the first two years of the debenture's life (i.e. years ending 30 June 2015-2016) (5 marks) ey on ol bli o201d bem 8) [TOTAL MARKS: 22] aros onul 0 d h bo01 o yn Page 7 of 12
show all working please

Answer 1

1) Liability

2) Provision

3) None of the above

4)None of the above

5)Liability