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QUESTION 4 Certain events occurred in Platinum Bhd during the year ended 30 June 2016...

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QUESTION 4 Certain events occurred in Platinum Bhd during the year ended 30 June 2016 in which provisions for warranty were recognised at RM2 million since the product warranty was part of the marketing strategy to encourage sales. This amount was based on actual previous pattern of repairs and replacements. However, the customer services division had estimated that only 5% of product A and 10% of product B will be returned for repairs and replacement out of the sales made during the year end. The sales for product A and product B during the year ended was RM5 million and RM20 million respectively REQUIRED: a) Explain the differences between provision and contingent liability in accordance with FRS 137 Provisions, Contingent Liabilities and Contingent Assets and why they are accounted for differently. b) Discuss and show the accounting treatments for the above events according to FRS 137 Provisions, Contingent Liabilities and Assets e) Define and explain the concept of recoverable amount contained within FRS 136

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