The Park Company is affected by the following contingencies at the end of 2016:

Question

The Park Company is affected by the following contingencies at the end of 2016:

What total amount should Parks accrue for loss contingencies in 2016?

$3,850,000

$3,500,000

$850,000

$750,000

1. Expropriation of Park's foreign assets, valued at $3,000,000, appears reasonably possible. 2. Parks' legal counsel has concluded that it is probable that the company will be required to pay damages of $500,000 in a lawsuit. 3. It appears remotely possible that a major customer will be unable to repay Parks on a note receivable for $100,000. 4. Parks' controller estimates that $250,000 of the company's pledged receivables are likely to be uncollectible, and the lender will require Parks to honor the amounts.

Explanation / Answer

Amount Parks should accrue for loss contingencies in 2016 = 500000+250000 =$750000 Option 4 is correct

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