Eradicate Now’ is an extermination company that specializes in pest control. On September 19, 2020, the company was identified as being potentially responsible for causing serious damages to the environment by the Environmental Regulatory Agency. The company’s management team met with it’s lawyers and concluded that it is probable that it will be held responsible for the damages caused. A reasonable estimate of the damages was $2,000,000. ‘Eradicate Now’ has an insurance policy of $10,000,000 with a deductible clause of $300,000. Required How should ‘Eradicate Now’ report this information on its financial statements for the year ended December 31, 2020?
Eradicate Now’ is an extermination company that specializes in pest control. On September 19, 2020, the company was identified as being potentially responsible for causing serious damages to the environment by the Environmental Regulatory Agency. The company’s management team met with it’s lawyers and concluded that it is probable that it will be held responsible for the damages caused. A reasonable estimate of the damages was $2,000,000. ‘Eradicate Now’ has an insurance policy of $10,000,000 with a deductible clause of $300,000. Required How should ‘Eradicate Now’ report this information on its financial statements for the year ended December 31, 2020?
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
Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments
Section: Chapter Questions
Problem 10MC
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Question
Eradicate Now’ is an extermination company that specializes in pest control. On
September 19, 2020, the company was identified as being potentially responsible for
causing serious damages to the environment by the Environmental Regulatory Agency.
The company’s management team met with it’s lawyers and concluded that it is probable
that it will be held responsible for the damages caused. A reasonable estimate of the
damages was $2,000,000.
‘Eradicate Now’ has an insurance policy of $10,000,000 with a deductible clause of
$300,000.
Required
How should ‘Eradicate Now’ report this information on its financial statements for the
year ended December 31, 2020?
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