On December 15, 2023, an employee filed a lawsuit against Bojack Company for damages suffered when one of Bojack’s equipment malfunctioned in August of 2023. The legal counsel of the company believes that it is probable that Bojack will pay the following damages:ProbabilityEstimated Litigation Cost50%P400,00030% 700,00020% 550,000Bojack Company provided a 10% risk adjustment factor.Using the expected value method, how much is the provision that should be recognized by Bojack Company on December 31, 2023?

Provision is the expected amount of liability or dues that needs to be settled by the business on…

Answered: On December 15, 2023, an employee filed…

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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On December 15, 2023, an employee filed a lawsuit against Bojack Company for damages suffered when one of Bojack’s equipment malfunctioned in August of 2023. The legal counsel of the company believes that it is probable that Bojack will pay the following damages:

Probability	Estimated Litigation Cost
50%	P400,000
30%	700,000
20%	550,000

Bojack Company provided a 10% risk adjustment factor.

Using the expected value method, how much is the provision that should be recognized by Bojack Company on December 31, 2023?

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