Reference no: EM133042896

Question - (i) M has paid $3 million towards the cost of a new hospital in the nearby town, on condition that the hospital agrees to give priority treatment to its employees if they are injured at work.

(ii) N is the freehold legal owner of a waste disposal tip. It has charged customers for the right to dispose of their waste for many years. The tip is now full, and heavily polluted with chemicals. If cleaned up, which would cost $8 million, the site of the tip could be sold for housing purposes for $6 million.

(iii) P has signed a contract to pay its finance director $300,000 per year for the next five years. He has agreed to work full time for the firm over that period.

(iv) Q has paid $25,000 to buy a patent right, giving it the right to sole use, for 8 years, of a manufacturing method which saves costs.

(v) Company A has leased an asset from company B which company A has to use for the asset's entire useful life. The asset would have a cash value of $100 000 if purchased outright.

Required - For each situation, state whether an asset or a liability is created.