Thomason Skin Care is a small innovative manufacturer which is major in skin lotion for babies and kids. Their product lines include skin lotion made from organic plants and neutral sunscreen. Unfortunately it has been sued for negligence three months ago. The management board, sales executives, product managers and innovation department together held several meetings. After many technical and marketing analysis, they know their company will likely lose the case. The amount Thomason Skin Care and its legal advisory estimate the company loss is around $600,000. Channel 100 reported the news regarding Thomason's recent law suit. A business man Mark used to buy the sunscreen Tiny Zinc for his kids and quite impressive at the product. He donate $100,000 for the continue research and improvement on the faulty lotion related to the law suit. Required Explain how Thomason Skin Care should account for the law suit amount and donation, justifying your answer by reference to the definitions and recognition criteria in the AASB Conceptual Framework. Also. state in the context, where appropriate, which ledger accounts should be debited and credited.
Scenario 2
Thomason Skin Care is a small innovative manufacturer which is major in skin lotion for babies
and kids. Their product lines include skin lotion made from organic plants and neutral
sunscreen. Unfortunately it has been sued for negligence three months ago. The management
board, sales executives, product managers and innovation department together held several
meetings. After many technical and marketing analysis, they know their company will likely
lose the case. The amount Thomason Skin Care and its legal advisory estimate the company
loss is around $600,000. Channel 100 reported the news regarding Thomason's recent law suit.
A business man Mark used to buy the sunscreen Tiny Zinc for his kids and quite impressive at
the product. He donate $100,000 for the continue research and improvement on the faulty
lotion related to the law suit.
Required
Explain how Thomason Skin Care should account for the law suit amount and donation,
justifying your answer by reference to the definitions and recognition criteria in the AASB
Conceptual Framework. Also. state in the context, where appropriate, which ledger accounts
should be debited and credited.
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