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Mgt401 GDB No. 3 solution

Friday, June 24, 2011 Posted In Edit This
Schedule

Opening Date and Time
22nd June, 2011 At 12:01 A.M. (Mid-Night)

Closing Date and Time
24th June, 2011 At 11:59 P.M. (Mid-Night)

Note: No extra or bonus/grace period is available for attempting GDB.

Discussion Question
Abacus Shipment is a cargo company which is engaged in transportation of dry bulk and liquid cargoes globally. The management office of the company is located in Lahore and it is listed on the Lahore Stock Exchange since 1990.

In year 2010, Abacus lost an entire shipload of cargo worth Rs. 100 million on a voyage to Canada. This seems to be a big loss for the company but a fortunate thing that it was insured through an insurance policy from PACCS insurance company. According to the report of the surveyor, the amount is claimable with subjected to deductible clause (10% of the claim) in the insurance policy. Before end of year, Abacus received a letter about acceptance of claim covering 90% of total insurance policy with intimating that cheque is in the mail (means the cheque is issued but it is on its way to you by mail).

ABC freight forwarding company which handed over the shipment to Abacus filed a lawsuit of Rs. 100 million against it by claiming the lost of shipment with additional lawsuit of Rs. 4 million resulting from the delay. The “Appellate Tribunal” of legal counsel of shipping companies declared, “It is probable that Abacus Shipment would have to pay Rs. 100 million but it is also a remote possibility that it would have to pay further Rs. 4 million which is claimed by the ABC freight forwarding company as this loss is specifically excluded from the freight forwarding contract.”

Requirements

You are required to identify:

1. At which amount Abacus Shipment would need to make a provision at year end towards the claim of ABC freight forwarding company?

2. At which amount Abacus Shipment would need to recognize a contingent asset at year end towards the claim by company itself against the PACCS insurance company?



SOLUTION:


At which amount Abacus Shipment would need to make a provision at year end towards the claim of ABC freight forwarding company?

104 Million Rs. 1st Ans


At which amount Abacus Shipment would need to recognize a contingent asset at year end towards the claim by company itself against the PACCS insurance company?

90 Million Rs. 2nd Ans

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