Jamison Company Uses IFRS for Its Financial Reporting

question 110

Multiple Choice

Jamison Company uses IFRS for its financial reporting. It produces machines that sell globally. All sales are accompanied by a one-year warranty. At the end of the year, the company has the following data:
-2,500 units were sold during the year.
-The trend over the past five years has been that 4% of the machines were defective in some way and had to be repaired. Of this 4%, half required a full replacement at a cost of £3,000 per unit and half were able to be repaired at an average cost of £300.
What is the expected value of the warranty cost provision?

• A) £300,000
• B) £165,000
• C) £330,000
• D) £150,000

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Definitions:

Government Bonds

Are debt securities issued by a government to support its spending, typically considered a low-risk investment.

Interest Rate

The proportion of a loan charged as interest to the borrower, typically expressed as an annual percentage of the loan amount.

Bond Worth

The current market value of a bond, reflecting investor perceptions of the issuer's creditworthiness and prevailing interest rates.

Growth Rate

The percentage increase in the size or value of something over a specific period, often used to describe the expansion of a company's revenue or economy.