Acca financial Accounting (FA) Study Text ac ca (FA)

How should these items be treated in the financial statements of 

Harriot Co? 

A 

Provision should be made for $55,000 

B 

Provision should be made for $50,000 and the legal costs should be 

disclosed by note 

C 

Provision should be made for $5,000 and the compensation of 

$50,000 should be disclosed by note 

D 

No provisions should be made but both items should be disclosed by 

note 

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Chapter 23 

KAPLAN PUBLISHING

 

485 

77  ABC Co estimated that inventory which had cost $50,000 had a net 

realisable value of $40,000 at 30 June 2005 and recorded it in the financial 

statements for the year ended 30 June 2005 at this lower value in 

accordance with IAS 2 Inventories. ABC Co subsequently discovered that 

the net realisable value of the inventory is likely to be only $30,000.