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Buffalo Corporation, in preparation of its December 3 1 , 2 0 2 5 , financial statements, is attempting to determine the proper accounting treatment
Buffalo Corporation, in preparation of its December financial statements, is attempting to determine the proper accounting treatment for each of the following situations.
As a result of uninsured accidents during the year, personal injury suits for $ and $ have been filed against the company. It is the judgment of Buffalo's legal counsel that an unfavorable outcome is unlikely in the $ case but that an unfavorable verdict approximating $reliably estimated will probably result in the $ case.
Buffalo owns a subsidiary in a foreign country that has a book value of $ and an estimated fair value of $ The foreign government has communicated to Buffalo 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, Buffalo expects to receive of the fair value of its properties as final settlement.
Buffalo'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 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 casualties a year during the rest of the past decade ranging from $ to $ 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 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. List all debit entries before credit entries.
No
Account Titles and Explanation
Debit
Credit
December
December
S
December
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