ubble 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 × 20%) in respect of the claim. 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. 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 ? Select one alternative A. $2,000,000 B. $2,100,000 C. $500,000 D. $100,000
ubble 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 × 20%) in respect of the claim. 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. 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 ? Select one alternative A. $2,000,000 B. $2,100,000 C. $500,000 D. $100,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 × 20%) in respect of the claim. 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.
What is the amount of the provision that should be made by Bubble Candies in accordance with IAS 37 Provisions,
Select one alternative
- A. $2,000,000
- B. $2,100,000
- C. $500,000
- D. $100,000
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