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    Western Company

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    cyberwarrior0000000002
    Western Company faces several contingent liabilities and gain contingencies that require accounting entries or footnote disclosures. A chemical leak investigation could result in a Php4,000,000 liability that requires disclosure but no entry. Western expects a Php2,500,000 gain from a lawsuit that is not recognized until realized. Western settled penalties with the city for Php4,200,000 that is probable and estimable, requiring an expense entry. A Php1,500,000 product recall is also probable and estimable, requiring a contingent liability entry.

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    Western Company

    Uploaded by

    cyberwarrior0000000002
    27 views1 page
    Western Company faces several contingent liabilities and gain contingencies that require accounting entries or footnote disclosures. A chemical leak investigation could result in a Php4,000,000 liability that requires disclosure but no entry. Western expects a Php2,500,000 gain from a lawsuit that is not recognized until realized. Western settled penalties with the city for Php4,200,000 that is probable and estimable, requiring an expense entry. A Php1,500,000 product recall is also probable and estimable, requiring a contingent liability entry.

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    Assignment

    Original Title

    WESTERN COMPANY

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    Western Company faces several contingent liabilities and gain contingencies that require accounting entries or footnote disclosures. A chemical leak investigation could result in a Php4,000,000 liability that requires disclosure but no entry. Western expects a Php2,500,000 gain from a lawsuit that is not recognized until realized. Western settled penalties with the city for Php4,200,000 that is probable and estimable, requiring an expense entry. A Php1,500,000 product recall is also probable and estimable, requiring a contingent liability entry.

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    © All Rights Reserved
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    27 views1 page

    Western Company

    Uploaded by

    cyberwarrior0000000002
    Western Company faces several contingent liabilities and gain contingencies that require accounting entries or footnote disclosures. A chemical leak investigation could result in a Php4,000,000 liability that requires disclosure but no entry. Western expects a Php2,500,000 gain from a lawsuit that is not recognized until realized. Western settled penalties with the city for Php4,200,000 that is probable and estimable, requiring an expense entry. A Php1,500,000 product recall is also probable and estimable, requiring a contingent liability entry.

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    of 1

    WESTERN COMPANY

    1. Possible Chemical Leaks Investigation:

    As there is no proposed deficiency assessment yet but it's reasonably possible and could result in an
    unfavorable settlement of up to Php4,000,000, a contingent liability should be disclosed in the financial
    statements, but no entry is required until the outcome becomes probable and estimable.

    2. Lawsuit against Faye Company:

    Western Company expects to be awarded Php2,500,000. This is a gain contingency, and gains are
    recognized only when realized. No entry is made until the award is finalized.

    3. Settlement with City Government Authorities:

    Western Company reached a settlement with the City Government authorities to pay Php4,200,000 in
    penalties. This is a loss contingency, and the loss is probable and estimable. An entry is needed to record
    the loss:

    Date Particulars Debit Credit

    February 15, 2021 Penalty Expense 4,200,000

    Contingent Liability 4,200,000

    4. Product Recall:

    The potential product recall would cost Php1,500,000. As the event is probable and estimable, a
    contingent liability should be recognized:

    Date Particulars Debit Credit

    December 31, 2020 Product recall expense 1,500,000

    Contingent Liability 1,500,000

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