Question

Pacific Cruise Lines is a defendant in litigation involving a swimming accident on one of its three cruise ships.Required:a. The likelihood of a payment occurring is probable, and the estimated amount is $1.17 million. b. The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $0.97 to $1.17 million. c. The likelihood of a payment occurring is reasonably possible, and the estimated amount is $1.17 million. d. The likelihood of a payment occurring is remote, while the estimated potential amount is $1.17 million.

Answer 1

Answer:

a. The likelihood of a payment occurring is probable, and the estimated amount is $1.17 million.

THE CONTINGENT LIABILITY NEEDS TO BE RECORDED SINCE IT IS PROBABLE THAT IT WILL OCCUR AND THE AMOUNT CAN BE ESTIMATED.

b. The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $0.97 to $1.17 million.

YOU ONLY HAVE TO DISCLOSE THE LIABILITY IN THE NOTES OF THE FINANCIAL STATEMENTS SINCE THE AMOUNT CANNOT BE DETERMINED.

c. The likelihood of a payment occurring is reasonably possible, and the estimated amount is $1.17 million.

YOU ONLY HAVE TO DISCLOSE THE LIABILITY IN THE NOTES OF THE FINANCIAL STATEMENTS SINCE THE EVENT IS ONLY REASONABLY POSSIBLE AND NOT PROBABLE.

d. The likelihood of a payment occurring is remote, while the estimated potential amount is $1.17 million.

NO RECORDING NOR DISCLOSING IS REQUIRED SINCE THE POSSIBILITY OF OCCURRING IS REMOTE.