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Should recognise a liability in accordance with the relevant

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Reference no: EM133004242

Johnny Debster is a famous musician. His son, River Debster wants to travel around Europe for 2 years or longer, but has no money saved. River has asked his father to act as an underwriter on a $100,000 loan so that the trip to Europe will be possible.
As an underwriter, Johnny will be legally required to pay off any of the loan outstanding should River fail to make the payments.

  • Johnny and River go to the bank and both sign the loan agreement.
  • Johnny has not mentioned to the bank that River has no money and has never held a job for more than one day. They both also failed to mention that River will be travelling to Europe on a Visa that doesn't allow him to work and if he enjoys his trip, he may never return.

Required:

Problem 1: From Johnny's point of view, should he recognise a liability in accordance with the relevant Conceptual Framework definition and recognition criteria.

Reference no: EM133004242

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