As of December 31, 2024, Duffy Company believed it was probable that an unfavorable outcome would result from a dispute with the Massachusetts State tax authorities. In-house tax experts estimated that Duffy would owe between $2113 - $4362 of additional taxes, with $3369 being the most likely amount. What is the journal entry, if any, that Duffy should record to reflect this in the 2024 financial statements? a. A journal entry is not booked since this is a gain contingency. b. Debit to Contingent Loss for $3369; Credit to Contingent Liability for $3369 c. Debit to Contingent Loss for $2113; Credit to Contingent Liability for $2113 d. Debit to Contingent Liability for $4362; Credit to Contingent Loss for $4362
As of December 31, 2024, Duffy Company believed it was probable that an unfavorable outcome would result from a dispute with the Massachusetts State tax authorities. In-house tax experts estimated that Duffy would owe between $2113 - $4362 of additional taxes, with $3369 being the most likely amount. What is the journal entry, if any, that Duffy should record to reflect this in the 2024 financial statements? a. A journal entry is not booked since this is a gain contingency. b. Debit to Contingent Loss for $3369; Credit to Contingent Liability for $3369 c. Debit to Contingent Loss for $2113; Credit to Contingent Liability for $2113 d. Debit to Contingent Liability for $4362; Credit to Contingent Loss for $4362
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
As of December 31, 2024, Duffy Company believed it was probable that an unfavorable outcome would result from a dispute with the Massachusetts State tax authorities. In-house tax experts estimated that Duffy would owe between $2113 - $4362 of additional taxes, with $3369 being the most likely amount.
What is the
a.
A journal entry is not booked since this is a gain contingency.
b.
Debit to Contingent Loss for $3369; Credit to
c.
Debit to Contingent Loss for $2113; Credit to Contingent Liability for $2113
d.
Debit to Contingent Liability for $4362; Credit to Contingent Loss for $4362
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