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10 marksSocial, Ethical, and Reporting Considerations

CAPE Accounting Unit 1 · 2016 · Paper 2 · Question 3(b)

Consider two independent scenarios under IFRS for SMEs Section 21: Provisions, Contingent Liabilities and Contingent Assets: Scenario 1: A worker injured due partially to negligence sued Rooney Co. for 800,000. Counsel considers an unfavourable outcome reasonably possible, estimating settlement between 250,000 and 500,000. Scenario 2: An author sued Early Co. on 04 October 2015 for breach of contract seeking 2,400,000 damages. Counsel considers an unfavourable outcome probable, reasonably estimating an award between 600,000 and 1,800,000.

Discuss the proper accounting treatment of EACH scenario, including required disclosures according to IFRS for SMEs Section 21, providing the rationale for your answers. (Scenario 1: 3 marks; Scenario 2: 7 marks)

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  1. 3(a)Prepare a Statement of Cash Flow for the year ended 31 December 2015.[15 marks]
  2. 3(c)Prepare a partial balance sheet for Manning Corporation showing the proper presentation and classification (current vs. long-term) of the liabilities at 31…[10 marks]

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