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Joe, the managing director of Valerina Ltd. had signed an agreement following his resignation on...

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Accounting

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Joe, the managing director of Valerina Ltd. had signed an agreement following his resignation on 15 May 2021. The agreement prevents Joe from working in competition with Valerina Ltd for a period of three years. Valerina Ltd paid Joe $250,000 in respect of the agreement. Joe is required to compensate Valerina Ltd $500,000 should he breach the terms. (7 Marks) Required: The CEO of Valerina Pty. Ltd. had come to you and enquired if the $250,000 spent on the matter above should be recognized on their balance sheet as an asset, a liability or neither. Use the definition of the terms Asset' and 'Liability, as well as the recognition criteria as stated in the Conceptual Framework, to explain whether the business should or should not recognize the $250,000 on their Balance Sheet. Note: In order to get full marks, you must clearly state and justify your answer. Stating yes or no without any justification will not receive any marks

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