2. During 20x1, Haft Co. became involved in a tax dispute with the BIR. At December 31, 20x1, Haft's tax advisor believed that an unfavorable outcome was probable. A reasonable estimate of additional taxes was P200,000 but could be as much as P300,000. After the 20x1 financial statements were issued, Haft received and accepted a BIR settlement offer of P275,000. What amount of accrued liability should Haft have reported in its December 31, 20x1 balance sheet?
2. During 20x1, Haft Co. became involved in a tax dispute with the BIR. At December 31, 20x1, Haft's tax advisor believed that an unfavorable outcome was probable. A reasonable estimate of additional taxes was P200,000 but could be as much as P300,000. After the 20x1 financial statements were issued, Haft received and accepted a BIR settlement offer of P275,000. What amount of accrued liability should Haft have reported in its December 31, 20x1 balance sheet?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
What is the correct answer in problems number 2&3 below? Provide a computation and explanation.
Transcribed Image Text:2. During 20x1, Haft Co. became involved in a tax
dispute with the BIR. At December 31, 20x1, Haft's tax
advisor believed that an unfavorable outcome was
probable. A reasonable estimate
of additional taxes was P200,000 but could be as much
as P300,000. After the 20x1 financial statements were
issued, Haft received and accepted a BIR settlement
offer of P275,000. What amount of accrued liability
should Haft have reported in its December 31, 20x1
balance sheet?
a. 200,000
b. 250,000
c. 275,000
d. 300,000
(AICPA)
3. In 20x1, Tucky Co. guaranteed a bank loan of Auto Co.
Auto Co. has made all the required loan payments
during the year and, as at December 31, 20x1, the bank
loan has a balance of
P4,000,000. What amount of provision should Tucky Co.
recognize on December 31, 20x1?
a. 4,000,000
b. 2,000,000
c. 1,000,000
d. O
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