Question

Desert Company 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. Desert's lawyer states that it is probable that Desert will lose the suit and be found liable for a judgment costing Desert anywhere from $2,045,331 to $8,095,229. However, the lawyer states that the most probable cost is $5,179,985. What is the amount of loss contingency (if any) Desert should record as a result of this information. If none, enter 0.

Answer 1

Loss contingency $5,179,985

Additional contingency $3,134,654

Step-by-step explanation:

Based on the information given the CONTINGENCY LOSS that Desert should record as a result of this information will be the probable cost amount of $5,179,985 that was stated by the lawyer and he should as well disclose extra or additional contingency up to the amount of $3,134,654 calculated as ($5,179,985-$2,045,331).

Therefore the amount of LOSS CONTINGENCY that Desert should record as a result of this information is $5,179,985 with ADDITIONAL CONTINGENCY of $3,134,654.