Great Adventures is a defendant in litigation involving a biking accident during
ID: 2464278 • Letter: G
Question
Great Adventures is a defendant in litigation involving a biking accident during one of its adventure races. The front tire on one of the bikes came off during the race, resulting in serious injury to the rider. However, Great Adventures can document that each bike was carefully inspected prior to the race. It may have been that the rider loosened the wheel during the race and then forgot to tighten the quick-release mechanism.
1. Record the journal entry The likelihood of a payment occuring is probable and the estimated amount is $111,000. (record a loss contingency if necessary)
2. Record the journal entry of the liklihood of a payment occuring is and the amount is estimated to be in the range of $91,000 to $141,000( record a contingency if necessary)
3. Record the journal entry of the liklihood of a payment occuring is reasonably possible, and the estimated amount is $111,000(record contingency if necessary)
4. Record the likihood of a payment occuring is remote, while the estimated potential amount is $111,000. (record loss of contingency if necessary)
Explanation / Answer
Journal entry
1)
Loss
111,000
To Contingent liability
111,000
2)
Loss
91,000
To Contingent liability
91,000
3)
No entry but disclosure required
4)
No entry and no disclosure
1)
Loss
111,000
To Contingent liability
111,000
2)
Loss
91,000
To Contingent liability
91,000
3)
No entry but disclosure required
4)
No entry and no disclosure
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