CIMA Exam CIMAPRA19-F02-1 Topic 2 Question 103 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam

Question #: 103
Topic #: 2

HJ is currently in dispute with an employee, who is claiming $400,000 in a legal case against them.

HJ's legal advisors have stated that it is probable that they willlose the case and will have to pay the amount claimed.

Also, HJ areclaiming $250,000 from a supplierof defective goods and the legal advisors have stated that it is probable that HJ will besuccessful in this claim.

What is the correct accounting treatment for these two items in HJ'sfinancial statements?

AProvide for the $400,000 potential outflow and disclose the $250,000 potential inflow.

BProvide for the $400,000 potential outflow and recognise the $250,000 potential inflow.

CDisclose the $400,000 potential outflow and disclose the $250,000 potential inflow.

DDisclose the $400,000 potential outflow and recognise the $250,000 potential inflow.

Show Suggested Answer

Suggested Answer: A

by Paz at Nov 15, 2024, 08:04 AM

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Florinda

3 months ago

Haha, this question is making my head spin! I'll go with B just because it sounds the most dramatic - providing for the big outflow and recognizing the inflow. Gotta love accounting, right?

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Suzi

2 months ago

Agreed, B it is. Accounting drama at its finest!

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Flo

2 months ago

Yeah, accounting can be tricky sometimes. But it's important to make sure everything is accounted for correctly.

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Graciela

3 months ago

Definitely, B sounds like the right move. Accounting can be intense sometimes.

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Teddy

3 months ago

I think B is the best option too. It's always interesting to see how these things play out in accounting.

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Ahmad

3 months ago

Yeah, B seems like the most logical choice. Let's go with that.

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Staci

3 months ago

I think B is the best option too. Dramatic accounting is the way to go!

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Geoffrey

4 months ago

This is a tricky one, but I'd say the answer is C. Disclose both the potential outflow and inflow. Better to be safe than sorry, you know?

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Tomas

3 months ago

I see your point, but I still think option C is the safest bet. Disclosing both potential outflows and inflows seems like the most conservative approach.

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Felix

3 months ago

I disagree, I believe option B is the correct accounting treatment. We should provide for the outflow and recognize the inflow.

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Freeman

3 months ago

I think option A is the best choice. We should provide for the potential outflow and disclose the potential inflow.

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Helga

4 months ago

I'm not sure. Shouldn't we recognize both the potential outflow and inflow in the financial statements?

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Bobbye

4 months ago

Hmm, I'm leaning towards D. Disclose the $400,000 potential outflow and recognize the $250,000 potential inflow. The key seems to be recognizing the inflow rather than just disclosing it.

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Alaine

4 months ago

I think the answer is B. You should provide for the $400,000 potential outflow and recognize the $250,000 potential inflow. Seems straightforward to me.

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