Question
Question 4 (20 marks) Consolation Corporation follows IFRS. Below are independent situations: A, During Year 8, a factory worker was injured. The accident was partly
Question 4 (20 marks) Consolation Corporation follows IFRS. Below are independent situations:
A, During Year 8, a factory worker was injured. The accident was partly the workers fault, and partly Consolations fault. The employee has sued Consolation Corp. for $600,000. The corporations legal counsel believes it is possible that Consolation will lose the lawsuit. If they lose, the estimated loss is $150,000 to $400,000.
B, During Year 8, Consolation was sued for $2,500,000. The plaintiff is alleging breach of contract, and defense counsel believes an unfavourable outcome is more likely than not. A reliable measurement of the award to the plaintiff is between $600,000 and $1,800,000.
C, During Year 8, Consolation sued another company. The corporations legal counsel believes it is likely that Consolation will be awarded damages of $1,000,000.
D, In November of Year 8, one of Consolations factories caught fire and was destroyed. Insurance will cover the full loss except for a deductible on the policy of $300,000. Consolation is quite concerned that insurance premiums will increase substantially, perhaps even double.
Instructions For each situation, fully discuss the correct accounting treatment, including any required disclosures. Provide an explanation for your answers. A reasonably thorough answer would be 50 to 70 words.
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