Reference no: EM132920227

Problem 1: State whether or not each of the following events would result in a liability being recognised in the accounts at 30 June. If so, what will the liability be called? If not, explain the reasons why it would not be recognised as a iability.

1 Taxes for the vear ended 30 June, which are not payable until October.

2 Wages to be paid on 2 July to cover the two-week period up to 30 June.

3 The company sells washing machines and gives a one-year warranty to repair or replace any faulty machines.

4 A construction company receives a $5 million advance in June for a contract. The work will commence in July.

5 The company has signed a contract to pay its managing director $500 000 per annum (inflation adjusted)for the next four years.

6 On 1 June, the company is informed that it is being sued for damages of $1 million caused by a faulty product. The company denies liability.

7 The company will go to arbitration in July to determine the amount of payment to repair environmental damage caused by one of its factories.