On 20 December 2017 one of Hikayat Corporation lorries was involved in an accident with a car. The lorry driver was responsible for the accident and the company agreed to pay for the repair to the car. The company put in a claim to its insurers on 17 January 2018 for the cost of the claim. The company expected the claim to be settled by the insurance company except for a $250 excess on the insurance policy. The insurance company may dispute the claim and not pay out; however, the company believes that the chance of this occurring is low. The cost of repairing the car was estimated as $5,000, all of which was incurred after the year-end. Required: Explain how this item should be treated in the financial statements for the year ended 31 December 2017.
On 20 December 2017 one of Hikayat Corporation lorries was involved in an
accident with a car. The lorry driver was responsible for the accident and the
company agreed to pay for the repair to the car. The company put in a claim
to its insurers on 17 January 2018 for the cost of the claim. The company
expected the claim to be settled by the insurance company except for a $250
excess on the insurance policy. The insurance company may dispute the
claim and not pay out; however, the company believes that the chance of this
occurring is low. The cost of repairing the car was estimated as $5,000, all of
which was incurred after the year-end.
Required:
Explain how this item should be treated in the financial statements for the
year ended 31 December 2017.
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