Accounting treatment for contingencies Analyze the following independent situations. a. Weaver, Inc. is being sued by a former employee. Weaver believes that there is a remote chance that the employee will win. The employee is suing Weaver or damages of $40,000. b. Gulf Oil Refinery had a gas explosion on one of its oil rigs. Gulf believes it is likely that it will have to pay environmental Clean-up Costs and damages in the future due to the gas explosion. Gulf cannot estimate the amount of the damages. c. Lawson Enterprises estimates that it will have to pay $75,000 in warranty repairs next year. Determine how each contingency should be treated
Accounting treatment for contingencies Analyze the following independent situations. a. Weaver, Inc. is being sued by a former employee. Weaver believes that there is a remote chance that the employee will win. The employee is suing Weaver or damages of $40,000. b. Gulf Oil Refinery had a gas explosion on one of its oil rigs. Gulf believes it is likely that it will have to pay environmental Clean-up Costs and damages in the future due to the gas explosion. Gulf cannot estimate the amount of the damages. c. Lawson Enterprises estimates that it will have to pay $75,000 in warranty repairs next year. Determine how each contingency should be treated
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter14: Completing A Quality Audit
Section: Chapter Questions
Problem 7RQSC
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Accounting treatment for contingencies
Analyze the following independent situations.
a. Weaver, Inc. is being sued by a former employee. Weaver believes that there is a remote chance that the employee will win. The employee is suing Weaver or damages of $40,000.
b. Gulf Oil Refinery had a gas explosion on one of its oil rigs. Gulf believes it is likely that it will have to pay environmental Clean-up Costs and damages in the future due to the gas explosion. Gulf cannot estimate the amount of the damages.
c. Lawson Enterprises estimates that it will have to pay $75,000 in warranty repairs next year.
Determine how each contingency should be treated
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