Purchase Solution

Examples of Contigent Liability

Not what you're looking for?

Ask Custom Question

Unruh Co. 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. Unruh's lawyer states that it is probable that Unruh will lose the suit and be found liable for a judgment costing Unruh anywhere from $800,000 to $4,000,000. However, the lawyer states that the most probable cost is $2,400,000. As a result of the above facts, how much should Unruh accrue for this liability?

in March 2007, an explosion occurred at Bowe Co.'s plant, causing damage to area properties. By May 2007, no claims had yet been asserted against Bowe. However, Bowe's management and legal counsel concluded that it was reasonably possible that Bowe would be held responsible for negligence, and that $3,000,000 would be a reasonable estimate of the damages. Bowe's $4,000,000 comprehensive public liability policy contains a $200,000 deductible clause. In Bowe's December 31, 2006 financial statements, for which the auditor's fieldwork was completed in April 2007, how should this casualty be reported?

Purchase this Solution

Solution Summary

The solution provides 2 examples of Unruh Co & Bowe Co's scenario related to damage to environment and illness to local resident.

Solution Preview

Unruh Co. - The lawyer estimate can be taken a reasonable estimate to make provision for contingent liability of $2,400,000. Lawyer are aware of what is the range of damages payable but with their experience ...

Purchase this Solution


Free BrainMass Quizzes
Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.