The Blaxland Plc Filed a Lawsuit Against D-Mart Machineries for Failure

question 14

Multiple Choice

The Blaxland Plc filed a lawsuit against D-Mart Machineries for failure to comply with the specifications of the factory equipment that they ordered and received.The solicitors for Blaxland Plc strongly believe that the company will receive €50 000 to €100 000 if they win the case.Which action is consistent with the Conceptual Framework?

• A)Blaxland Plc should recognise a receivable of €75 000, the expected value of the gain.
• B)Blaxland Plc should recognise a receivable of €50 000, a conservative estimate of the gain.
• C)Blaxland Plc should not recognise the receivable until it is probable that they have won the case.
• D)Blaxland Plc should not recognise the receivable because while the solicitor is expecting to win the case, the receivable cannot be estimated reliably.

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Definitions:

Common Stock

Type of equity security that represents ownership in a corporation, with voting rights and the potential for dividends.

Earnings Per Share

A calculation that indicates the portion of a company's profit allocated to each outstanding share of common stock.

Common Stock

A type of security that represents ownership in a corporation, with holders typically having voting rights.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset over its useful life to reflect wear and tear or obsolescence.