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| Prior to the financial year end of 31 July 20X9, Cannon Co has received a claim of $100,000 from a supplier forproviding poor quality goods which have damaged the supplier’s plant and equipment. Cannon Co’s lawyers havestated that there is a 20% chance that Cannon will successfully defend the claim. Which of the following is the correct accounting treatment for the claim in the financial statements for the yearended 31 July 20X9? A. Cannon should neither provide for nor disclose the claim B. Cannon should disclose a contingent liability of $100,000 C. Cannon should provide for the expected cost of the claim of $100,000 D. Cannon should provide for an expected cost of $20,000 |
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