A company spills chemicals onto Russian land, causing damage that will cost $7million to clean. There is no environmental legislation but the companyy has clear green policies on its website. What are the effects of this on the Financial Statement of the company in the current year?
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A company spills chemicals onto Russian land, causing damage that will cost $7million to clean. There is no environmental legislation but the companyy has clear green policies on its website.
What are the effects of this on the Financial Statement of the company in the current year?
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- Accounting treatment for contingencies Analyze the following independent situations. Weaver, Inc. is being sued by a former employee. Weaver believes that there is a remote chance that the employee will win. The employee is suing Weaver or damages of $40,000. Gulf Oil Refinery had a gas explosion on one of its oil rigs. Gulf believes it is likely that it will have to pay environmental Clean-up Costs and damages in the future due to the gas explosion. Gulf cannot estimate the amount of the damages. Lawson Enterprises estimates that it will have to pay $75,000 in-warranty repairs next year. Determine how each contingency should be treatedThe following items pertain to possible provisions: A company self-insures for floods. That is, it pays no insurance but is liable to replace assets lost through flood damage. No losses have been incurred this year, but there have been $195,000 of losses in most other years, and the company is concerned that there might well be $485,000 of losses next year, evening out the pattern. A company offers a three-year guarantee over parts and labour for products sold to ensure that parts work as expected. There were no payments this year, and only 5% of products sold this year are expected to need repairs in the next year. The cost of this work would be in the range of $125,000. A company has been sued by a customer for $1,130,000. The customer slipped on ice coming out of the store and claims the store did not put salt down or clear the stairs properly. The company’s lawyer has indicated that there is a 10% chance that the company will lose the lawsuit based on past history. The company,…Bell International estimates that a $10 million loss will occur if a foreign government expropriates some company property. Expropriation is considered reasonably possible. How should Bell report the loss contingency? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) The contingency is acrrued The contingency is not accrued This is a gain contingency This is a loss contingency It is probable that the confirming event will occur The contingency can be reasonably estimated A disclosure note should describe the contingency None of these
- Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2024 of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigation indicates that a product recall is probable, estimated to cost the company $2.2 million. The fiscal year ends on December 31. Required: 1. Should this contingent liability be reported, disclosed in a note only, or neither? 2. What loss, if any, should Top Sound report in its 2024 income statement? 3. What liability, if any, should Top Sound report in its 2024 balance sheet? 4. What entry, if any, should be recorded? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Should this contingent liability be reported, disclosed in a note only, or neither? This contingent liability should beYour company operates a theme park, which has the latest rides and an annual attendance of over 10 million people (around 60,000 people within approximately 80 hectares of guest area on a normal day). In August 2021, a very strong typhoon devastated the area. The roofs were blown away, the Ferris wheel fell down and most of the rides would need major repairs. As the accountant of the company, you are aware that the entity has property all-risk insurance, which covers material damage and business interruption. How would you account for the financial impact of these transactions?Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2024 of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigation indicates that a product recall is probable, estimated to cost the company $2.6 million. The fiscal year ends on December 31. Required:1. Should this contingent liability be reported, disclosed in a note only, or neither?2. What loss, if any, should Top Sound report in its 2024 income statement?3. What liability, if any, should Top Sound report in its 2024 balance sheet?4. What entry, if any, should be recorded? 1. Should this contingent liability be reported, disclosed in a note only, or neither? This contingent liability should be ?????? 2. What loss, if any, should Top Sound report in its 2024 income statement? (Enter your answer in dollars, not in millions (i.e. 5.5 million should be entered as 5,500,000).) loss to be reported ???????? 3. What…
- Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2024 of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigation indicates that a product recall is probable, estimated to cost the company $3.2 million. The fiscal year ends on December 31. Required: 1. Should this contingent liability be reported, disclosed in a note only, or neither?2. What loss, if any, should Top Sound report in its 2024 income statement?3. What liability, if any, should Top Sound report in its 2024 balance sheet?4. What entry, if any, should be recorded?Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2021 of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigation indicates that a product recall is probable estimated to cost the company $4 million. The fiscal year ends on December 31.Required:1. Should this contingent liability be reported, disclosed in a note only, or neither? Explain.2. What loss, if any, should Top Sound report in its 2021 income statement?3. What liability, if any, should Top Sound report in its 2021 balance sheet?4. What entry, if any, should be recorded?The following items pertain to possible provisions: a. A company uses a part manufactured in Germany in its automobile manufacturing plant. There has been a concern about the failure of this part in cars manufactured in Germany. No failures have occurred to date in Canada. The company decided to do a voluntary recall of all cars manufactured with this part. The recall is 40% complete and has cost $1,250,000 to date. b. A company self-insures for floods. That is, it pays no insurance but is liable to replace assets lost through flood damage. No losses have been incurred this year, but there have been $225,000 of losses in most other years, and the company is concerned that there might well be $450,000 of losses next year, evening out the pattern. c. A company offers a three-year guarantee over parts and labour for products sold to ensure that parts work as expected. There were no payments this year, and only 5% of products sold this year are expected to need repairs in the next year.…
- Accounting treatment for contingencies Analyze the following independent situations. a. Weaver, Inc. is being sued by a former employee. Weaver believes that there is a remote chance that the employee will win. The employee is suing Weaver or damages of $40,000. b. Gulf Oil Refinery had a gas explosion on one of its oil rigs. Gulf believes it is likely that it will have to pay environmental Clean-up Costs and damages in the future due to the gas explosion. Gulf cannot estimate the amount of the damages. c. Lawson Enterprises estimates that it will have to pay $75,000 in warranty repairs next year. Determine how each contingency should be treatedResearch Problem 1. Gray Chemical Company manufactured pesticides that were toxic. Over the course of several years, the toxic waste contaminated the air and water around the company's plant. Several employees suffered toxic poisoning, and the Environmental Protection Agency cited the company for violations. In court, the judge found Gray guilty and imposed fines of $15 million. The company voluntarily set up a charitable fund for the purpose of bettering the environment and funded it with $8 million. The company incurred legal expenses in setting up the foundation and defending itself in court. The court reduced the fine from $15 million to $7 million. Gray deducted the $8 million paid to the foundation and the legal expenses incurred. The IRS disallowed both deductions on the grounds that the payment was, in fact, a fine and in violation of public policy. Gray's president, Ted Jones, has contacted you regarding the deductibility of the $7 million fine, the $8 million payment to the…Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2024 of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigation indicates that a product recall is probable, estimated to cost the company $3.3 million. The fiscal year ends of December 31. Required: 1 Should this contingent liability be reported, disclosed in a note only, or neither? 2 What loss, if any, should Top Sount report in its 2024 income statement? 3 What liability, if any should Top Sount report in its 2024 income statement? 4 What entry, if any, should be recorded?