INTERMEDIATE ACCOUNTING II

FINAL EXAM

FALL $2024$

On June, Year $1,$ Westchase Corporation became involved in product litigation. As a result of this litigation, it is probable that Westchase will have to pay $$900,000.$ In August, a competitor commenced a suit against Westchase alleging violation of antitrust laws seeking damages of $$100,000,000.$ Westchase denies the allegations, and the likelihood of Westchase paying any damages is remote. In September, Harris County brought action against Westchase for $$9,000,000$ for polluting. It is reasonably possible that Harris County will be successful, but the amount of damages Westchase will have to pay is not reasonably determinable. Westchase's tax rate is $40\%.$

What amount, if any, should be accrued by a charge to income in Year $1?$

A$.$ $$9,900,000$

B$.$ $$109,900,000$

C$.$ $$900,000$

D$.$ $$109,000,000$