A truck owned and operated by Roadhog Company was involved in an accident with an auto driven by M.Sore on January 12,2014.Roadhog received notice on April 24,2014,of a lawsuit for $750,000 damages for a personal injury suffered by M.Sore.Roadhog's counsel believes it is reasonably possible that M.Sore will be successful against the company for an estimated amount in the range between $200,000 and $500,000.No amount within this range is a better estimate of potential damages than any other amount.It is expected that the lawsuit will be adjudicated in the latter part of 2015.What amount of loss should Roadhog accrue at December 31,2014?

Question

Quizplus · Accepted Answer

When a loss contingency exists, such as a lawsuit, and no amount within the range of potential loss is more likely than any other, the entity should accrue the minimum amount in the range, which in this case is $200,000. However, the correct answer is $0 because the question does not provide an option that matches the correct accrual amount based on accounting principles. Therefore, without the correct option listed, the answer defaults to $0, indicating that none of the provided options are correct based on the given scenario and accounting standards.

A Truck Owned and Operated by Roadhog Company Was Involved