On January 3, 2010, Boyer Corp.owned a machine that had cost $200,000.The accumulated depreciation was $120,000, estimated salvage value was $12,000, and fair value was $320,000.On January 4, 2010, this machine was irreparably damaged by Pine Corp.and became worthless.In October 2010, a court awarded damages of $320,000 against Pine in favor of Boyer.At December 31, 2010, the final outcome of this case was awaiting appeal and was, therefore, uncertain.However, in the opinion of Boyer's attorney, Pine's appeal will be denied.At December 31, 2010, what amount should Boyer accrue for this contingent asset?

Question

Quizplus · Accepted Answer

Contingent assets are not recognized in financial statements until they are virtually certain. Since the outcome of the appeal is uncertain, Boyer should not accrue any amount for the contingent asset.