Assignment Gradebook ORION Downloadable eTextbook ctice ment CALCULATOR FULL SCR

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Assignment Gradebook ORION Downloadable eTextbook ctice ment CALCULATOR FULL SCREEN PRINTER VERSION 4BACK NEXT Problem 13-11 Cheyenne Corporation, in preparation of its December 31, 2017, financial statements, is attempting to determine the proper accounting treatment for each of the following situations. 1. As a result of uninsured accidents during the year, personal injury suits for $375,100 and $54,000 have been filed against the company. It is the judgment of Cheyenne's legal counsel that an unfavorable outcome is unlikely in the $54,000 case but that an unfavorable verdict approximating $263,400 will probably result in the $375,100 case. 2 Cheyenne owns a subsidiary in a oreign country that has a book value o $6,240,000 and an estimate air va e of d lo. ? o ang ve ment, as ommunicatedi Cheyenne its intention to expropriate the assets and business of all foreign investors. On the basis of settlements other firms have received from this same country, Cheyenne 3. Cheyenne's chemical product division consisting of five plants is uninsurable because of the special risk of injury to employees and losses due to fire and explosion. The year 2017 is considered one of the safest (luckiest) in the division's history because no loss due to injury or casualty was suffered. Having suffered an average of three casualtiesa year during the rest of the past decade (ranging from $54,000 to $734,000), management is certain that next year the company will probably not be so fortunate. (a) Prepare the journal entries that should be recorded as of December 31, 2017, to recognize each of the situations above. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. 1. December 31, 2017 Date Account Titles and Explanation Debit Credit 2. December 31, 2017 3. December 31, 2017

Explanation / Answer

SOLUTION

S.No. Account titles and Explanation Debit ($) Credit ($) 1. Lawsuit Loss 263,400 Lawsuit contingent liabilities 263,400 (A loss and a liability has been recorded) 2. Loss from expropriation 3,444,360 Allowance for expropriation 3,444,360 ($6,240,000-(30% * $ 9,318,800)) 3. No entry required (Reasonable value of estimated loss is not determined)

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