Winter 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.Winter's lawyer states that it is probable that Winter will lose the suit and be found liable for a judgment costing Winter anywhere from $1,200,000 to $6,000,000.However, the lawyer states that the most probable cost is $3,600,000.As a result of the above facts, Winter should accrue

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Winter's lawyer states that the most probable cost of the lawsuit is $3,600,000. Therefore, Winter should accrue a loss contingency of $3,600,000. Additionally, since the range of possible outcomes is from $1,200,000 to $6,000,000, Winter should disclose an additional contingency of up to $2,400,000 ($6,000,000 - $3,600,000) in the notes to its financial statements. Choice A is incorrect because it assumes that the cost will not exceed the low end of the range ($1,200,000), which is not probable. Choice C is incorrect because it does not take into account the possibility of a contingency above the most probable cost. Choice D is incorrect because it assumes that there is no probable loss contingency, which is not supported by the facts given.

Winter Cois Being Sued for Illness Caused to Local Residents as as a Result