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2. Accounting Adjustment Part(a) Vape-Monster Ltd has failed to recognise on its balance sheet a contingent liability of $88 million in damages which becomes payable
2. Accounting Adjustment Part(a) Vape-Monster Ltd has failed to recognise on its balance sheet a contingent liability of $88 million in damages which becomes payable in the 2021 year if it loses a long-running court case that started in 2019. The existence of this contingent liability was known both by Vape-Monster and external analysts in 2019. It is highly probable that Vape-Monster will lose the case. Vape-Monster's cost of debt is 10% and its tax rate is 28%. The $88 million potentially payable in 2021 is a nominal dollar value at the start of 2021. Required: Please show the adjustments required for Vape-Monster's 2019, 2020 and 2021 balance sheets so that the contingent liability is accounted for as a liability that could actually be paid in the 2021 year (14 Marks) Please use the worksheet that looks like this. 2019 YEAR ASSETS LABUTI EQUITY PROFIT OTHER 2020 YEAR ASSETS EQUITY PROFIT OTHER 2021 YEAR ASSETS LABILITIES + EQUITY PROFIT OTHER Total: 14 Marks 2019 YEAR ASSETS = LIABILITIES + EQUITY PROFIT OTHER 2020 YEAR ASSETS = LIABILITIES + EQUITY PROFIT OTHER 2021 YEAR ASSETS = LIABILITIES + EQUITY PROFIT OTHER
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