The journal entry for the estimated contingency loss.

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Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 13.14BE

To determine

To prepare: The journal entry for the estimated contingency loss.

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Required: Answer the following questions In June 2021, a costumer at ABC Corp slipped on a wet floor and broke a hip. The costumer sued the corporation in July,2021. The company's attorneys believe that it is 55% likely that ABC will lose this case. Management.concludes that the 55% likelihood of incurring the loss is less than probable. The attorneys estimate that the loss will range between $700,000 and $800,000, Management There is no best estimate in this range of possible losses. The company beginning balance for provision liability is $100,000. The company's management considers that it is highly likely (85%) that they will receive other customer claims, therefore they want the ending balance of the provision liability to be $900,000. Use IFRS to identify the loss and provision liability. You must show the computations to receive the score.

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Answer 2

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Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 13.14BE

To determine

To prepare: The journal entry for the estimated contingency loss.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 3

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 13.14BE

To determine

To prepare: The journal entry for the estimated contingency loss.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 13.14BE

To determine