Chapter 8, Problem 8.1APCP

Great Adventures    Continuing Problem

(This is a continuation of the Great Adventures problem from earlier chapters.)

Great Adventures is a defendant in litigation involving a biking accident during one of its adventure races. The front tire on one of the bikes came off during the race, resulting in serious injury to the rider. However, Great Adventures can document that each bike was carefully inspected prior to the race. It may have been that the rider loosened the wheel during the race and then forgot to tighten the quick-release mechanism.

Required:

For each of the following scenarios, determine the appropriate way to report the situation. Explain your reasoning and record any necessary entry.

  1.    The likelihood of a payment occurring is probable, and the estimated amount is $120,000.

  2.    The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $100,000 to $150,000.

  3.    The likelihood of a payment occurring is reasonably possible, and the estimated amount is $120,000.

  4.    The likelihood of a payment occurring is remote, while the estimated potential amount is $120,000.