Current Attempt in Progress In preparing Marigold Corporation's December 31, 2020 financial statements under ASPE, the vice-president, finance, is trying to determine the proper accounting treatment for each of the following situations. 1 2. As a result of uninsured accidents during the year, personal injury suits for $365,000 and $60,000 have been filed against Marigold. It is the judgement of Marigold's lawyers that an unfavourable outcome is unlikely in the $60,000 case but that an unfavourable verdict for approximately $250,000 is likely in the $365,000 case. In early 2020, Marigold received notice from the provincial environment ministry that a site Marigold had been using to dispose of waste was considered toxic, and that Marigold would be held responsible for its cleanup under provincial legislation. The vice-president, finance, discussed the situation over coffee with the vice-president, engineering. The engineer stated that it would take up to three years to determine the best way to remediate the site and that the cost would be considerable, perhaps as much as $450,000 to $1.20 million or more. The engineering vice-president advocates recognizing at least the minimum estimate of $450,000 in the current year's financial statements. The financial vice- president advocates just disclosing the situation, and the inability to estimate the cost, in a note to the financial statements. Marigold Corporation has a foreign division that has a net carrying amount of $5,680,000 and an estimated fair value of $8.9 million. The foreign government has told Marigold that it intends to expropriate the assets and business of all foreign investors. Based on settlements that other firms have received from this same country, Marigold expects to receive 41% of the fair value of its properties as compensation Marigold's chemical products division consists of five plants and is uninsurable because of the special risk of injury to employees and losses due to fire and explosion. Consequently, Sahoto must self-insure for these risks. The year 2020 is considered one of the safest in the division's history because there were no losses due to injury or casualty. Having suffered an average of three casualties a year during the rest of the past decade (ranging from $60,000 to $700,000). management is certain that next year Marigold will not be so fortunate. 3 4. (a) Prepare the journal entries that should be recorded as at December 31, 2020 to recognize each of the situations above. Credit account titles are automatically indiented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.) Account Titles and Explanation Debit Credit 1 2. 3
