X is currently defending two legal actions:
(i) An employee, who suffered severe acid burns as a result of an accident in X’s factory, is suing for $20,000, claiming that the directors failed to provide adequate safety equipment. X’s lawyers are contesting the claim, but have advised the directors that they will probably lose.
(ii) A customer is suing for $50,000, claiming that X’s hair-care products damaged her hair. X’s lawyers are contesting this claim, and have advised that the claim is very unlikely to succeed. How much should X provide for these legal claims in its financial statements?
(A) $0
(B) $20,000
(C) $50,000
(D) $70,000
Which of the following could be regarded as a related party of X:
(A) P is X’s main customer, taking 50 per cent of their turnover.
(B) S is X’s main supplier, supplying approximately 40 per cent of X’s purchases.
(C) A is the managing director of X and is the largest single shareholder, holding 35 per cent of the equity.
(D) B is X’s banker and has provided X with an overdraft facility and a short-term loan.