Problem 11. On January 12, 2021, a fire at a production facility damaged a number of adjacent buildings owned by other businesses. Pearl Company's insurance policy does not cover damage to property of others. insurance companies for those other businesses have billed Pearl for the estimated cost of P2.4million required to restore the damaged buildings. In the 2021 financial statements of Pearl Company, how much accrued liability should be recognized?
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- The warehouse had a fire on November 7, 2021, which resulted in the destruction of merchandise worth $12,000. The insurance provider has declared that it would only cover the first $3,000 of the claim under the provisions of the insurance contract. There are currently no entries to document this. Create modifying entries.On November 1, 2021, a fire totally destroyed the building of ABC Company. The building cost of P2,000,000 and a carrying amount of P1,200,000 as of the date of the fire. A P1,000 claim was filed on November 15, 2021. On January 5, 2022, after due investigation, it was ABC is free of negligence and the insurance company agreed to pay ABC the P1,000,000 in 9. Prepare the entry on November 1, 2021, to record the impairment of the building. 10. Prepare the entry on January 5, 2022, to record the insurance claim.Pending Damage Suit Disclosure On December 15, 2019, a truck driver for Cork Transfer Company negligently rounded a curve that was also a bridge covering several local merchant shops. The truck jumped the guardrail and fell 30 feet onto one of the shops, causing highly flammable chemicals in the truck to explode. Although by February 22, 2020 (the date on which Corks financial statements for 2019 are issued), no claims had been filed against Cork, the companys legal counsel believes it is probable that some will be filed in the future. However, counsel does not believe it can reasonably estimate the amount of these potential claims. Required: Explain the accounting treatment, if any, Cork should give the contingent loss occurring from the wreck in the December 31, 2019, financial statements.
- On 20 December 2017 one of Hikayat Corporation lorries was involved in anaccident with a car. The lorry driver was responsible for the accident and thecompany agreed to pay for the repair to the car. The company put in a claimto its insurers on 17 January 2018 for the cost of the claim. The companyexpected the claim to be settled by the insurance company except for a $250excess on the insurance policy. The insurance company may dispute theclaim and not pay out; however, the company believes that the chance of thisoccurring is low. The cost of repairing the car was estimated as $5,000, all ofwhich was incurred after the year-end.Required:Explain how this item should be treated in the financial statements for theyear ended 31 December 2017.Item B. Contingent Liability Facts: You are auditing a very successful and highly profitable manufacturing company as of December 31, 2020. The Company has always maintained adequate insurance in different areas. The Company has decided, effective January 1, 2021, not to purchase insurance against risk of loss that may result from injury to others, damage to the property of others, or interruption of its business operations. The Company would like to record a $5,000,000 reserve as of December 31, 2020 for claims associated with future events which may occur. Required: Should the Company record this $5,000,000 Reserve for Claims (a contingent liability) in its 12/31/2020 Financial Statements? Why or why not?On January 15, 2021, an explosion occurred at the Aizel Company plant causing extensive property damage to area buildings. By March 1, 2022, no claims hand been asserted against the entity but management and counsel concluded that it is likely that claims will be asserted and that it is reasonably possible that the entity will be responsible for damages. Management believed that P1,250,000 would be a reasonable estimate of the liability. The entity's P5,000,000 comprehensive public liability policy has a P250.000 deductible clause. The financial statements for 2021 were issued on March 31, 2022. What amount of loss from lawsuit should be reported in the income statement for 2021?
- On November 25, 2020, an explosion occurred at a Brit company plant causing extensive property damage to area buildings. By March 10, 2021, claims had been asserted against Brit Company. The management and counsel concluded that it is probable Brit Company will be responsible for damages, and that P3,500,000 would be a reasonable estimate of the liability. The entity's P10,000,000 comprehensive public liability policy has a P500,000 deductible clause. The financial statements for 2020 were issued on March 25, 2021. What amount of loss from lawsuit should be reported in the income statement for 2020? What amount of liability from lawsuit should be reported on December 31, 2020?On Nov. 25, 2017, an explosion occurred at Stefan company causing extensive property damage to area buildings. By March 10, 2018, claims had been asserted against the entity. The management and counsel concluded that it is probable that the entity would be responsible for damages, and that 3,500,000 is a reasonable estimate of the liability. Stefan’s 10,000,000 comprehensive public policy has a 500,000 deductible clause. The financial statements were issued on March 31, 2018. What amount of liability from lawsuit should be reported on December 31, 2017?In August 2021, a company's worker was injured in the factory in an accident partially the result of his own negligence. The worker has sued the company for P800,000. The company's counsel believes it is possible but not probable that the outcome of the suit will be unfavorable, and that the settlement would cost the company from P250,000 to P500,000. At year-end, the company should A. disclose the existence of a contingent liability with a range of P250,000 to P500.000. B. disclose the existence of a contingent liability for P375,000. C. record a liability of P375.000. D. do nothing. A suit for breach of contract seeking damages of P2,400,000 was filed by an author against a company on October 4, 2021. The company's legal counsel believed that an unfavorable outcome is probable. A reasonable estimate of the award to the plaintiff is between P600,000 and P1,800,000. No amount within this range is a better estimate of potential damages than any other amount. At yearend, the company…
- Sunland Company self-insures its property for fire and storm damage. If the company were to obtain insurance on the property, it would cost them $1970000 per year. The company estimates that on average it will incur losses of $1610000 per year. During 2021, $705000 worth of losses were sustained. How much total expense and/or loss should be recognized by Sunland Company for 2021?Q10.1 On 30 July 2021, the Department of Environmental Services began legal proceedings against Simon Ltd for a major leak due to toxic smoke being released from Soluble Ltd's factory into the atmosphere. The leak occurred on 25 June 2021. If found to be negligent by the court, Simon Ltd is liable to pay a material sum of $200,000 to the Department of Environmental Services. In addition, Simon Ltd will also need to pay damages to local residents and legal fees totalling $150,000. Assume the event is material and that Simon Ltd had not issued its 2021 Financial Statements on 30 July 2021. Required: Classify the above event occurring after the end of the reporting period as an adjusting or a non-adjusting event and explain the reason. Explain the impact, if any, on the financial statements of Simon Ltd for the year ended 30 June 2021 to comply with AASB110 Events after the Reporting Period. Please type your answer below:On April 30, 20x2, an explosion occurred at CONVOLUTE TWIST Co's plant causing extensive property damage to area buildings. CONVOLUTE's management and counsel concluded that it is likely that claims will be asserted and that it is probable that CONVOLUTE will be held responsible for damages. CONVOLUTES management believed that P5,000,000 would be a reasonable estimate of its liability. CONVOLUTE'S P20,000,000 comprehensive public liability policy has a P1,000,000 deductible clause. CONVOLUTE's financial statements were authorized for issue on March 30, 20x2. How should the event above be reported in CONVOLUTE'S December 31, 20x1 financial statements?