A Railway Company Is Required, Under Law, to Overhaul Its

question 14

Multiple Choice

A railway company is required, under law, to overhaul its rail-tracks every three years as a safety measure. The appropriate treatment of this event for the purposes of preparing financial statements is:

• A) recognise as a provision for future maintenance costs;
• B) estimate the future maintenance costs and charge as depreciation over the next three years;
• C) disclose in the notes as a contingent liability, but do not recognise;
• D) estimate the future cash outflows and discount to determine the amount to be recognised as a deferred liability.

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Definitions:

Priming

A psychological effect in which exposure to a stimulus influences the response to a subsequent stimulus, without conscious guidance or intention.

Ailments

Refers to various types of diseases or health conditions that affect physical or mental well-being.

Fever

A medical condition characterized by an elevated body temperature beyond the normal range, often a sign of infection or illness.

Primed

The state of being mentally prepared or made ready for a specific task or reaction, often unconsciously influenced by prior stimuli.