Is probable future outflow of resources

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Reference no: EM132601192

Account for each of the items below, clearly indicating the effect on the income statement and the statement of financial position.

Question a. Budaya Bhd provides warranties to accompany the sales of its eye glass frames to its customers. Based on industry experience, it is estimated that the entity would incur RM140,000 warranty costs during the year 2019. Does Budaya Bhd have a present obligation and can the amount for provision be estimated reliably?

Question b. Budaya Bhd has a policy of refunding purchases to its dissatisfied customers. Even though the entity has no legal obligation to do so, the policy of making refunds is made known to the public. Does Budaya Bhd have a constructive obligation and can the amount be estimated reliably?

Question c. An employee at Budaya Bhd has suffered a serious injury while operating laboratory equipment at one of the entity's outlets. The employee has filed a lawsuit against Budaya Bhd. Based on the evidence of the case, lawyer for Budaya Bhd believe that they will not lose the case. Is there a probable future outflow of resources?

Reference no: EM132601192

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