Chapter 11, Problem 2QAP

XYZ Company has long owned a manufacturing site that has now been discovered to be contaminated with toxic waste. The entity has acknowledged its responsibility for the contamination.   An initial clean up feasibility study has shown that it will cost at least P500,000 to clean up the toxic waste.   During the current year, the entity has been sued for patent infringement and lost the case. A preliminary judgment of P300,000 was issued and is under appeal.   The entity’s attorney agrees that it is probable that the entity will lose this appeal.   What amount of provision should be accrued as liability?   a. 0 b. 800,000 c. 500,000 d. 300,000

The review of minutes and confirmation letter obtained from the legal counsel of the company revealed the following information: • EMPLEO has been named a liable party for toxic waste cleanup on its land, and must pay an as-yet undetermined amount for environmental remediation activities. An adjoining land owner, Clear Toothpaste Company, sold its property because of possible toxic contamination of the water supply and resulting potential adverse public reaction towards its product. Clear Toothpaste sued EMPLEO for damages. There is reasonable possibility that Clear Toothpaste will prevail and be awarded between P250,000 and P600,000. o EMPLEO is also the defendant of a lawsuit on an incident involving an accidental crash by its company car to another vehicle. In your inspection of the letter obtained from its legal counsel, they believe that the company would be liable to pay damages amounting to P300,000, but it is also possible that it will pay up to P500,000. Question: How much…

Superb Corporation is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Superb’s lawyer states that it is probable that Superb will lose the suit and be found liable for a judgment costing Superb anywhere from $1,200,000 to $6,000,000. However, the lawyer states that the most probable cost is $3,600,000. As a result of the above facts, Superb should accrue Select one: a loss contingency of $3,600,000 and disclose an additional contingency of up to $2,400,000. a loss contingency of $3,600,000 but not disclose any additional contingency. a loss contingency of $1,200,000 and disclose an additional contingency of up to $4,800,000. no loss contingency but disclose a contingency of $1,200,000 to $6,000,000.