bingok32

Event 1
A claim has been made against a company for injury suffered by a driver in connection with building work by the company. Legal advisers have confirmed that the company will probably have to pay damages of $500,000 but that a counter claim made against the building sub-contractors for $200,000 would probably be successful.

Event 2
The Managing Director of a company have discovered a vase in the meeting room and have sent it to an auction house, which has confirmed that it should sell for $2 million in the following month’s auction.

Event 3
The manufacturer of a snooker table has received a letter from a professional snooker player who was defeated in the final of a major snooker competition, threatening to sue the manufacturer for $10 million, being his estimate of his loss of earnings through failing to win the competition, on the grounds that the table was not level.

(i)With regard to contingencies, what information should be disclosed in the financial statements?               
(2) Explain the accounting treatment with reasons for the above three events.


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