2. On November 5, 2021, a DEF Corporation's truck was in an accident with an auto driven by Mr.Dela Cruz. DEF received notice on January 12, 2022 of a lawsuit for P700,000 damages forpersonal injuries suffered by Mr. Dela Cruz. DEF Corporation's counsel believes it is probablethat Mr. Dela Cruz will be awarded an estimated amount in the range between P200,000 andP450,000, and that P300,000 is a better estimate of potential liability than any other amount.DEF's accounting period ends on December 31, and the 2021 financial statements were issuedon March 2, 2022.What amount of loss should DEF accrue at December 31, 2021?

Contingent liability refers to those liability of a company which is occurred due to the result of…

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What amount of loss should DEF accrue at December 31, 2021?

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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Question

2. On November 5, 2021, a DEF Corporation's truck was in an accident with an auto driven by Mr.
Dela Cruz. DEF received notice on January 12, 2022 of a lawsuit for P700,000 damages for
personal injuries suffered by Mr. Dela Cruz. DEF Corporation's counsel believes it is probable
that Mr. Dela Cruz will be awarded an estimated amount in the range between P200,000 and
P450,000, and that P300,000 is a better estimate of potential liability than any other amount.
DEF's accounting period ends on December 31, and the 2021 financial statements were issued
on March 2, 2022.
What amount of loss should DEF accrue at December 31, 2021?

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