Wilson Company is involved in a litigation suit concerning the clean-up of old underground oil storage tanks on property it sold to a housing development company five years ago. The attorneys for Wilson Company cannot give a best estimate for the probable liability; however, the attorneys state that the liability to Wilson Company will probably fall within a range of $2 million to $10 million. According to the SEC, what should Wilson Company record with regards to this environmental liability?
A) No entry is required.
B) A loss and liability of $10 million.
C) A loss and liability of $6 million.
D) A loss and liability of $2 million.

Question

Quizplus · Accepted Answer

When a range of potential losses exists and no single amount within the range is more likely than any other, the company should record the minimum amount of the range, which in this case is $2 million.

Wilson Company Is Involved in a Litigation Suit Concerning the Clean-Up