As a result of an allegedly defective equipment causing harm to an employee, an entity is facing a lawsuit requesting damages. The entity's legal counsel estimates that there is an approximately 60% possibility that the entity will lose the case and that it will have to pay an amount between $100,000 and $200,000 with no amount within such range being more likely than any other amount in the range. How much should the entity record as a contingent loss, if any? (Select the best answer.) a. O $0 b. $60,000 C. O $100,000 d. O $150,000

As a result of an allegedly defective equipment causing harm to an employee, an entity is facing a lawsuit requesting damages. The entity's legal counsel estimates that there is an approximately 60% possibility that the entity will lose the case and that it will have to pay an amount between $100,000 and $200,000 with no amount within such range being more likely than any other amount in the range. How much should the entity record as a contingent loss, if any? (Select the best answer.) a. O $0 b. $60,000 C. O $100,000 d. O $150,000

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

As a result of an allegedly defective equipment causing harm to an employee, an
entity is facing a lawsuit requesting damages. The entity's legal counsel estimates
that there is an approximately 60% possibility that the entity will lose the case
and that it will have to pay an amount between $100,000 and $200,000 with no
amount within such range being more likely than any other amount in the range.
How much should the entity record as a contingent loss, if any? (Select the best
answer.)
a. O $0
b. $60,000
c. O $100,000
d. O $150,000

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