For the past 3 months, Kenton Inc has been negotiating a labor contract with potentially significant wage increases Before completing the year end financial statements on November, 30 Kenton determined that the contract was likely to be signed in the near future Kenton has estimated that the effect...

c The likelihood of contingencies is divided into three categories probable likely to ...

For the past 3 months, Kenton Inc. has been negotiating a labor contract with potentially significant wage

Question:

For the past 3 months, Kenton Inc. has been negotiating a labor contract with potentially significant wage increases. Before completing the year-end on November, 30. Kenton determined that the contract was likely to be signed in the near future. Kenton has estimated that the effect of the new contract will cost the company either $100,000, $200,000, or $300,000. Also Kenton believes that each estimate has an equal chance of occurring and that the likelihood of the new contract being retroactive to the fiscal year ended November 30 is probable. According to regarding contingencies, Kenton should
a. Do nothing because no loss will occur if the contract is never signed.
b. Disclose each loss contingency amount in the notes to the November 30 Accrue $100,000 u the income statement, and disclose the nature of the contingency and the additional loss exposure.
d. Follow conservatism and accrue $300,000 in the income statement, and disclose the nature of the contingency.
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...