**Allowance for Legal Liability - Income Statement vs. Tax Form****A. Case Study Overview:** On November 14, 2013, a delivery truck of the Boone Company was involved in an accident, injuring twelve pedestrians, including four fatalities. Boone estimated in 2013 that it would incur costs ranging from $52 million to $110 million to resolve these legal issues. Boone decided to allow for $70 million in damages for the fiscal year of 2013. This section requires indicating charges to the income statement and tax form.**Legal Settlements Table:**| Year | Actual Payments | |------|-----------------| | 2013 | $19 million | | 2014 | $20 million | | 2015 | $14 million | | 2016 | $12 million | | 2017 | $13 million | | **Cumulative Total** | **$78 million** | - **Income Statement:** - Details needed for the amount reflected each year. - **Tax Form:** - Details needed for amounts claimed each year.**B. Financial Reporting Question:**1. **Ending Balance Sheet as of December 31, 2014:** - Determine the reported amount for "Allowance For Legal Matters Outstanding."2. **Classification of the Account:** - Identify and circle the correct classification for "Allowance For Legal Matters Outstanding" from the options below: - Asset - Liability - Owners’ Equity - Revenue - Expense This exercise involves completing the table based on financial accounting principles and determining the correct classification for the allowed legal liabilities on the financial statements.

According to IFRS 37, Provisions, Contingent Liabilities and Contingent Assets, A provision is the…

A. On November 14, 2013 a delivery truck of the Boone Company jumped the curb in a quiet residential neighborhood, running into a bus stop where twelve pedestrians were waiting for a bus. All twelve pedestrians suffered injuries, including four fatalities. In 2013 Boone estimates that the total costs it will incur to resolve all the legal suits charged by the plaintiffs will be between $52-110 million. The fiscal year is the calendar year. Indicate what would be charged to the income statement and the tax form if in 2013 Boone allows an amount for damages of $70 million. By the end of 2017 all related legal matters had been resolved, and the actual settlements and related payments were as shown in the table. Complete the table for the dollar amounts shown on the income statements and tax forms for each of these years: Cumulative Total 2013 2014 2015 2016 2017 Actual $19 $20 $14 $12 $13 $78 Раyments Income Statement Тах Form A. On the ending balance sheet of December 31, 2014, how much was reported in the following account: Allowance For Legal Matters Outstanding: B. Which kind of account (circle one item below) is the Allowance For Legal Matters Outstanding? • Asset Liability Owners' Equity Revenue Expense

A. On November 14, 2013 a delivery truck of the Boone Company jumped the curb in a quiet residential neighborhood, running into a bus stop where twelve pedestrians were waiting for a bus. All twelve pedestrians suffered injuries, including four fatalities. In 2013 Boone estimates that the total costs it will incur to resolve all the legal suits charged by the plaintiffs will be between $52-110 million. The fiscal year is the calendar year. Indicate what would be charged to the income statement and the tax form if in 2013 Boone allows an amount for damages of $70 million. By the end of 2017 all related legal matters had been resolved, and the actual settlements and related payments were as shown in the table. Complete the table for the dollar amounts shown on the income statements and tax forms for each of these years: Cumulative Total 2013 2014 2015 2016 2017 Actual $19 $20 $14 $12 $13 $78 Раyments Income Statement Тах Form A. On the ending balance sheet of December 31, 2014, how much was reported in the following account: Allowance For Legal Matters Outstanding: B. Which kind of account (circle one item below) is the Allowance For Legal Matters Outstanding? • Asset Liability Owners' Equity Revenue Expense

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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