On December 31, 2021, Mith Company was a defendant in a pending lawsuit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 4-25 (with solution)
![b. An accrued liability of P500,000 and disclosure of a
Problem 4-25 (AICPA Adapted)
On December 31, 2021, Mith Company was a defendant in a
pending lawsuit.
In the opinion of the entity's attorney, it is probable that
Mith Company will have to pay P500,000 and it is reasonably
possible that Mith Company will have to pay P600,000 as a
result of this lawsuit.
What should be reported in the 2021 financial statements!
a. An accrued liability of P500,000 only.
b. An accrued liability of P500,000 and disclosure of a
contingent liability of P100,000
c. An accrued liability of P600,000 only.
d. No information about this lawsuit.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8beeacf9-6657-4a8e-9542-319299add774%2F839ef48d-725a-421e-9b37-18b60932df8a%2Fzwconx_processed.jpeg&w=3840&q=75)
Transcribed Image Text:b. An accrued liability of P500,000 and disclosure of a
Problem 4-25 (AICPA Adapted)
On December 31, 2021, Mith Company was a defendant in a
pending lawsuit.
In the opinion of the entity's attorney, it is probable that
Mith Company will have to pay P500,000 and it is reasonably
possible that Mith Company will have to pay P600,000 as a
result of this lawsuit.
What should be reported in the 2021 financial statements!
a. An accrued liability of P500,000 only.
b. An accrued liability of P500,000 and disclosure of a
contingent liability of P100,000
c. An accrued liability of P600,000 only.
d. No information about this lawsuit.
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