6. Buwis Buhay Incorporated had several outstanding obligations on December 31, 2019. The brief descriptions listed below can be ascertained from these liabilities. r. • In June 2019, Buwis Buhay was involved in a court case amounting to P10,000,000. The attorney assessed that it is probable that the company will win the case with P4,500,000 as the best estimate of the reward. • In August 2019, Baguio City brought an action against the company for polluting the surrounding rivers with its waste products costing P5,000,000. It is probable that Baguio City will be successful but the amount of damages Buwis Buhay might have to pay is not to exceed P2,500,000. • In December 2019, another litigation case amounting to P20,000,000 was filed against Buwis Buhay for injuring pedestrians due to its renovation projects within the premise. This court case is seen to have remote likelihood of occurrence because the evidences filed are not strong.

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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6. Buwis Buhay Incorporated
had several outstanding
obligations on December 31,
2019. The brief descriptions
listed below can be ascertained
from these liabilities.
r.
In June 2019, Buwis Buhay was involved in a court case amounting to P10,000,000. The attorney
assessed that it is probable that the company will win the case with P4,500,000 as the best estimate
of the reward.
• In August 2019, Baguio City brought an action against the company for polluting the surrounding
rivers with its waste products costing P5,000,000. It is probable that Baguio City will be successful
but the amount of damages Buwis Buhay might have to pay is not to exceed P2,500,000.
• In December 2019, another litigation case amounting to P20,000,000 was filed against Buwis Buhay
for injuring pedestrians due to its renovation projects within the premise. This court case is seen to
have remote likelihood of occurrence because the evidences filed are not strong.
Transcribed Image Text:6. Buwis Buhay Incorporated had several outstanding obligations on December 31, 2019. The brief descriptions listed below can be ascertained from these liabilities. r. In June 2019, Buwis Buhay was involved in a court case amounting to P10,000,000. The attorney assessed that it is probable that the company will win the case with P4,500,000 as the best estimate of the reward. • In August 2019, Baguio City brought an action against the company for polluting the surrounding rivers with its waste products costing P5,000,000. It is probable that Baguio City will be successful but the amount of damages Buwis Buhay might have to pay is not to exceed P2,500,000. • In December 2019, another litigation case amounting to P20,000,000 was filed against Buwis Buhay for injuring pedestrians due to its renovation projects within the premise. This court case is seen to have remote likelihood of occurrence because the evidences filed are not strong.
7. Refer to the MC No. 6. What
should be done with the
transaction on August 2019? *
a. Disclose as provision since the
occurrence is probable.
b. Recognize as provision since it is
O probable that Buwis Buhay will lose
the case.
c. Disclose as contingent asset
because even if it is probable that
the company will be successful,
contingent asset is never
recognized unless realized.
d. Recognize as contingent liability
since it is probable that Buwis
Buhay will be indebted.
Transcribed Image Text:7. Refer to the MC No. 6. What should be done with the transaction on August 2019? * a. Disclose as provision since the occurrence is probable. b. Recognize as provision since it is O probable that Buwis Buhay will lose the case. c. Disclose as contingent asset because even if it is probable that the company will be successful, contingent asset is never recognized unless realized. d. Recognize as contingent liability since it is probable that Buwis Buhay will be indebted.
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