a. 2,000,000b. 1,000,000c. No provision is to be recognized but a disclosure of Php2,000,000 is appropriated. No provision and no disclosure to be made What amount of provision should be provided in relation to guarantee? *Effortless Company provided the following information on Dec. 31, 2021:- Effortless has signed as guarantor for a Php2,000,000 loan by Power Bankto Haggardness, Inc., a principal supplier to Efforless Company. There is aremote likelihood that Effortless will have to make payment on behalf ofHaggardness.- Effortless is defending against a labor dispute and believes that there is50% chance it will lose in court. If the entity loses, management believesthat effects will fall somewhere in the range of Php1,500,000 and 2,500,000.

Provision refers to the account that would be recorded to present the liability of the entity and it…

Answered: . 2,000,000 b. 1,000,000 c. No…

. 2,000,000 b. 1,000,000 c. No provision is to be recognized but a disclosure of Php2,000,000 is appropriate d. No provision and no disclosure to be made

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

a. 2,000,000
b. 1,000,000
c. No provision is to be recognized but a disclosure of Php2,000,000 is appropriate
d. No provision and no disclosure to be made

What amount of provision should be provided in relation to guarantee? *
Effortless Company provided the following information on Dec. 31, 2021:
- Effortless has signed as guarantor for a Php2,000,000 loan by Power Bank
to Haggardness, Inc., a principal supplier to Efforless Company. There is a
remote likelihood that Effortless will have to make payment on behalf of
Haggardness.
- Effortless is defending against a labor dispute and believes that there is
50% chance it will lose in court. If the entity loses, management believes
that effects will fall somewhere in the range of Php1,500,000 and 2,500,000.

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Accounting for Current liabilities, Provisions and Contingencies

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