Vinson Co is being sued for illness caused to local residents as a result of negligence on thecompany's part in permitting the local residents to be exposed to highly toxic chemicals fromits plant. Vinson's lawyer states that it is probable that Vinson will lose the suit and be foundliable for a judgment costing Vinson anywhere from $600,000 to $3,000,000. However, thelawyer states the most probable cost is $1,800,000. As a result of these facts, Vinson shouldaccrue:O a loss contingency of $600,000 and disclose an additional contingency of up to $2,400,000O a loss contingency of $1.800,000 and disclose an additional contingency of up to $1,200,000O a loss contingency of $1.800.000 but NOT disclose any additional contingency.O no loss contingency but disclose a contingency of $600,000 to $3.000.000

In accounting, a loss contingency is a potential financial obligation that may occur depending on…

Answered: Vinson Co is being sued for illness…

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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Pitchfork Company is being sued by a competitor in a lawsuit alleging patent infringement. Pitchfork's lawyers state that it is possible Pitchfork will lose the suit and be found liable for a judgment costing anywhere from $1,800,000 to $9,000,000. However, the lawyers state that no one estimate is more likely. As a result of the above information, Pitchforks should report: a contingent liability in the amount of $5,400,000, representing the average amount within the range of damages, on its Balance Sheet and disclose an additional contingency of up to $3,600,000 in the notes to the Balance Sheet. a contingent liability in the amount of $1,800,000 on its Balance Sheet and disclose an additional contingency of up to $7,200,000 in the notes to the Balance Sheet. a contingent liability in the amount of $5,400,000 on its Balance Sheet, but not disclose any additional contingency. O a possible contingency of between $1,800,000 and $9,000,000 only in the notes of the 10K.
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A lawsuit has been filed against Sunland Company for wrongful termination. Sunland's legal counsel had encouraged the company to settle because it is likely they will lose the case. The amount of the loss is estimated to be between $573000 and $1062000. Legal counsel believes that the case could be settled for $864000. Sunland should report O a contingent liability for $864000. O an estimated liability for $573000. O a contingent loss of $1062000. O no loss or liability until the case is settled. Attempts: 0 of 1 used Submit Answer

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