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Determine whether a provision should be recognized

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Reference no: EM132678227

Collingwood Pty Ltd has the following obligations:

  • It has agreed repair faulty surfboards that it has sold. Evidence indicates that of the 2,000 surfboards that were produces in overseas factories, about 20% use defective fiberglass that will need to be replaced at an expected cost of about $250 per surfboard
  • It has a policy of providing long service leave to its employee. Under the arrangement, if the employees stay for a period of then years then they are entitled to an additional 15 weeks of holidays. Collingwood Pty Ltd believes it can reliably estimate how much the current years operations have contributed to the obligation.
  • Collingwood Pty Ltd has an amount owing to its overseas supplier of $70,000, which it expects to pay in the next month.
  • Collingwood Pty Ltd has a bank loan of $500,000.

Problem 1: For the above transactions and events determine whether a provision should be recognized and provide a rationale for your response.

Reference no: EM132678227

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