August 2019, Baguio City brought an action against the company for polluting the surrounding rivers with its waste products costing P5,000,000. It is probable that Baguio City will be successful but the amount of damages Buwis Buhay might have to pay is not to exceed P2,500,000.
6. Buwis Buhay Incorporated had several outstanding obligations on December 31, 2019. The brief descriptions listed below can be ascertained from these liabilities. What is the correct treatment for the court case that happened on June 2019?
• in June 2019, Buwis Buhay was involved in a court case amounting to P10,000,000. The attorney assessed that it is probable that the company will win the case with P4,500,000 as the best estimate of the reward.
• In August 2019, Baguio City brought an action against the company for polluting the surrounding rivers with its waste products costing P5,000,000. It is probable that Baguio City will be successful but the amount of damages Buwis Buhay might have to pay is not to exceed P2,500,000.
•In December 2019, another litigation case amounting to P20,000,000 was filed against Buwis Buhay for injuring pedestrians due to its renovation projects within the premise. This court case is seen to have remote likelihood of occurrence because the evidences filed are not strong.
a. Recognize as a provision since the outcome is probable.
b. Disclose as a
c. Recognize as contingent gain since Buwis Buhay is probable to win the case.
d. Disclose as contingent asset because of probability.
Refer to the MC No. 6. What should be done with the transaction on August 2019? *
a. Disclose as provision since the occurrence is probable.
b. Recognize as provision since it is probable that Buwis Buhay will lose the case.
c. Disclose as contingent asset because even if it is probable that the company will be successful, contingent asset is never recognized unless realized.
d. Recognize as contingent liability since it is probable that Buwis Buhay will be indebted.
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