QUESTION 4 THIS QUESTION CONSISTS OF TWO UNRELATED PARTS PART A: The following provision has been included in the financial statements of Thriving (Pty) Ltd as at 31 December 2023: • Provision for expected future operating losses R100 000 REQUIRED: Discuss how the provision should be accounted for in the annual financial statements of Thriving (Pty) Ltd so as to comply with IAS 37 of the International Financial Reporting Standards. PART B: During 2022, Enviroserve (Pty) Ltd is involved in litigation relating to environmental damages and is being sued for damages amounting to R800 000. Legal costs are estimated to amount to R40 000. The definition and recognition criteria of a provision are met. In the following financial year, 2023, actual costs paid amount to: • Environmental damage repair costs R 820 000 • Legal costs R 40 000 REQUIRED: Prepare all the necessary general journal entries to account for the environmental damage and legal costs in the 2022 and 2023 financial statements of Enviroserve (Pty) Ltd. Journal dates and narrations are not required.
QUESTION 4
THIS QUESTION CONSISTS OF TWO UNRELATED PARTS
PART A:
The following provision has been included in the financial statements of Thriving (Pty)
Ltd as at 31 December 2023:
• Provision for expected future operating losses R100 000
REQUIRED:
Discuss how the provision should be accounted for in the annual financial statements
of Thriving (Pty) Ltd so as to comply with IAS 37 of the International Financial
Reporting Standards.
PART B:
During 2022, Enviroserve (Pty) Ltd is involved in litigation relating to environmental
damages and is being sued for damages amounting to R800 000. Legal costs are
estimated to amount to R40 000. The definition and recognition criteria of a provision
are met.
In the following financial year, 2023, actual costs paid amount to:
• Environmental damage repair costs R 820 000
• Legal costs R 40 000
REQUIRED:
Prepare all the necessary general
damage and legal costs in the 2022 and 2023 financial statements of Enviroserve
(Pty) Ltd. Journal dates and narrations are not required.
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