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?

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?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter9: Current Liabilities And Contingent Obligations

Section: Chapter Questions

Problem 4C: Pending Damage Suit Disclosure On December 15, 2019, a truck driver for Cork Transfer Company...

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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?
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?
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2.You are provided with the following information: The damage from the destruction of insured machinery that took place on 30/9/2020 was not recorded in the relevant accounts. The insurance company has undertaken to cover 70% of the residual value of the machines. The machines were purchased on 1/5/2018 instead of 198.000€ and the amount of the annual depreciation of the machines is 19.800€. A correction record is requested (a) if the error was found in the financial year (2020) and (b) if the error was found in the next financial year (2021), i.e. the error while the correction was made in 2020, the correction entry is made in 2021.
Below are three independent situations. 1. In August 2026 a worker was injured in the factory in an accident, partially the result of his own negligence. The worker has sued Barkley Co. for $800,000. Counsel believes it is reasonably possible that the outcome of the suit will be unfavorable and that the settlement would cost the company from $250,000 to $500,000. 2. A suit for breach of contract seeking damages of $3,000,000 was filed by an author against Henderson Co. on October 4, 2026. Henderson's legal counsel believes that an unfavorable outcome is probable. A reasonable estimate of the award to the plaintiff is between $1,000,000 and $2,250,000. No amount within this range is a better estimate of potential damages than any other amount. 3. Kroft is involved in a pending court case. Kroft’s lawyers believe it is probable that Kroft will be awarded damages of $1,000,000. Discuss the proper accounting treatment, including any required disclosures, for each situation. Give the…
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A truck owned and operated by Abbott Company was involved in an accident with an auto driven by L. Costello on January 12, 2018. Abbott received notice on April 24, 2018, of a lawsuit for P800,000 damages for a personal injury suffered by L. Costello. Abbott’s counsel believes it is reasonably probable that L. Costello will be successful against the company for an estimated amount in the range between P200,000 and P500,000. No amount within this range is a better estimate of potential damages than any other amount. It is expected that the lawsuit will be adjudicated in the latter part of 2019. What amount of loss should Abbott accrue at December 31, 2018?
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