Sunrise Company provided the following information on December 31, 2019: A personal injury liability suit for P500,000 was brought against Sunrise Company in March 2019. The management and legal counsel of Sunrise Company concluded that it is not probable that Sunrise Company will be responsible for damages and that P150,000 is the best estimate of the damages. In July 2019, Sunrise Company became involved in a tax dispute with the BIR pertaining to 2018 income tax. In December 2019, a judgment for P400,000 was assessed against Sunrise Company by the tax court. Sunrise Company is appealing the amount of judgment. The tax advisor and legal counsel of Sunrise Company believed it is probable that the assessment can be reduced on appeal by 50%. Sunrise Company signed as guarantor for P200,000 loan by PNB to Sunset Company, a principal supplier of Sunrise. By reason of financial difficulties, it is probable that Sunrise Company shall pay P200,000 loan with only a 60% recovery anticipated from Sunset Company. Required: Prepare journal entries to recognize any provision on December 31, 2019.
Sunrise Company provided the following information on December 31, 2019:
A personal injury liability suit for P500,000 was brought against Sunrise Company in March 2019.
The management and legal counsel of Sunrise Company concluded that it is not probable that Sunrise Company will be responsible for damages and that P150,000 is the best estimate of the damages.
In July 2019, Sunrise Company became involved in a tax dispute with the BIR pertaining to 2018 income tax.
In December 2019, a judgment for P400,000 was assessed against Sunrise Company by the tax court.
Sunrise Company is appealing the amount of judgment.
The tax advisor and legal counsel of Sunrise Company believed it is probable that the assessment can be reduced on appeal by 50%.
Sunrise Company signed as guarantor for P200,000 loan by PNB to Sunset Company, a principal supplier of Sunrise.
By reason of financial difficulties, it is probable that Sunrise Company shall pay P200,000 loan with only a 60% recovery anticipated from Sunset Company.
Required:
Prepare
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