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. What amount of liability from lawsuit should be reported on December 31, 2021? a. 3,500,000 b. 1,750,000 C. 1,500,000 d. 750,000

. What amount of liability from lawsuit should be reported on December 31, 2021? a. 3,500,000 b. 1,750,000 C. 1,500,000 d. 750,000

FINANCIAL ACCOUNTING
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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Problem 4-23 (with solution)

Problem 4-23 (AICPA Adapted) On November 25, 2021 an explosion occurred at a Rex Company plant causing extensive property damage to area buildings. By March 10, 2022, claims had been asserted against Rex Company. The management and counsel concluded that it is probable Rex Company will be responsible for damages, and that P3,500,000 would be a reasonable estimate of the liability. Rex Company had a P10,000,000 comprehensive public liability policy with P500,000 deductible clause. The financial statements for 2021 were issued on March 25, 2022. 1. What amount of loss from lawsuit should be reported in the income statement for 2021? a. 3,500,000 b. 3,000,000 с. 500,000 d. . What amount of liability from lawsuit should be reported on December 31, 2021? a. 3,500,000 b. 1,750,000 C. 1,500,000 d. 750,000 129
Transcribed Image Text:Problem 4-23 (AICPA Adapted) On November 25, 2021 an explosion occurred at a Rex Company plant causing extensive property damage to area buildings. By March 10, 2022, claims had been asserted against Rex Company. The management and counsel concluded that it is probable Rex Company will be responsible for damages, and that P3,500,000 would be a reasonable estimate of the liability. Rex Company had a P10,000,000 comprehensive public liability policy with P500,000 deductible clause. The financial statements for 2021 were issued on March 25, 2022. 1. What amount of loss from lawsuit should be reported in the income statement for 2021? a. 3,500,000 b. 3,000,000 с. 500,000 d. . What amount of liability from lawsuit should be reported on December 31, 2021? a. 3,500,000 b. 1,750,000 C. 1,500,000 d. 750,000 129
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