contestada

A customer of RoughEdge Sharpeners alleges that RoughEdge's new razor sharpener had a defect that resulted in serious injury to the customer. RoughEdge believes the customer has a 51% chance of winning the case, and that if the customer wins the case, there is a range of losses of between $1,000,000 and $3,000,000 in which any number is equally likely to occur. Under U.S. GAAP, RoughEdge should accrue a liability in the amount of:

Multiple Choice
A. $3,000,000.
B. $0.
C. $1,000,000.
D. $2,000,000.

Respuesta :

Answer:

D. $2,000,000.

Explanation:

According to the US GAAP, if the chances of loss occur in the future we make a provision so that it cannot impact the activities of the business organization

In this question, we use the mid point method, plus the range of losses is also given in the question.

So, the accrued liability would be

= $1,000,000 - $3,000,000

= $2,000,000

The mid value is $2,000,000

Otras preguntas