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Swifty Corporation is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Swifty's lawyer states that it is probable that Swifty will lose the suit and be found liable for a judgment costing Swifty anywhere from $1830000 to $8960000. However, the lawyer states that the most probable cost is $5410000. As a result of the above facts, Swifty should accrue:_______

a. a loss contingency of $1,800,000 and disclose an additional contingency of up to $7,200,000.
b. a loss contingency of $5,400,000 and disclose an additional contingency of up to $3,600,000.
c. a loss contingency of $5,400,000 but not disclose any additional contingency.
d. no loss contingency but disclose a contingency of $1,800,000 to $9,000,000.

Respuesta :

Answer:

Option b is correect

Explanation:

A loss contingency is disclosed because the event leading to the loss is probable which can be reasonably estimated.

eooyibo123

Answer:

b. a loss contingency of $5,400,000 and disclose an additional contingency of up to $3,600,000.

Explanation:

Swiftly corporation is most likely to lose the law suit so it is better they be prepared for the outcome.

According to the lawyer there could be a judgment costing Swifty anywhere from $1830000 to $8960000, and most probably cost is $5410000.

First of all Swiftly should set aside the most probable amount as that is what swiftly will most likely pay that is $5,410,000~$5,400,000

And set aside extra difference of the most probable and the minimum in case of worst save scenario. That is $5,410,000 - $1,830,000= $3,580,000~$3,600,000

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