During 20x6, a catering company served spoiled food to a wedding reception. As a result

of this, several people became violently ill. These have contacted a lawyer and are

collectively suing the catering company for $1,600,000 (total). You are the catering

companys accountant and are in the process of preparing the financial statements for the

year ended December 31, 20x6.

Legal counsel has provided you with the following

Probability Payout

30% $0

25% 200,000

25% 600,000

20% 1,600,000

Required

Estimate the provision that needs to be accrued, if any. Use the following table to analyze

the situation.

Present obligation as a

result of a past event

Probable outflow

Measurable?

Conclusion