On March 15, 2022, MOSCOW received a court decision on a lawsu filed against the company in January 2021. As of December 31, 2021, MOSCOW did not recognize a liability as a result of this case because according to its legal counsel, it was not probable that the company will be found liable. On March 15, the court ordered MOSCOW to pay the amount of P2 million to the plaintiff. Although MOSCOW intended to make an appeal, it is still considered probable that it will pay an amount between P1.5 million to P2 million, with P2 million considered to be the most probable amount. MOSCOW's financial statements for the year ended December 31, 2021 were

On March 15, 2022, MOSCOW received a court decision on a lawsu filed against the company in January 2021. As of December 31, 2021, MOSCOW did not recognize a liability as a result of this case because according to its legal counsel, it was not probable that the company will be found liable. On March 15, the court ordered MOSCOW to pay the amount of P2 million to the plaintiff. Although MOSCOW intended to make an appeal, it is still considered probable that it will pay an amount between P1.5 million to P2 million, with P2 million considered to be the most probable amount. MOSCOW's financial statements for the year ended December 31, 2021 were

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

On March 15, 2022, MOSCOW
received a court decision on a lawsuit
filed against the company in January
2021. As of December 31, 2021,
MOSCOW did not recognize a
liability as a result of this case
because according to its legal
counsel, it was not probable that the
company will be found liable. On
March 15, the court ordered
MOSCOW to pay the amount of P2
million to the plaintiff. Although
MOSCOW intended to make an
appeal, it is still considered probable
that it will pay an amount between
P1.5 million to P2 million, with P2
million considered to be the most
probable amount. MOSCOW's
financial statements for the year
ended December 31, 2021 were
authorized for issue on April 30,
2022. How much is the estimated
liability for damages to be reported
by MOSCOW on its statement of
financial position at December 31,
2021? *

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