Moonlight Company has a several contingent liabilities on December 31, 2018. A brief description of each...

 

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Moonlight Company has a several contingent liabilities on December 31, 2018. A brief description of each liability given below: >A personal injury liability suit for P500,000 was brought against Moonlight Company in March 2018. The management and legal counsel of Moonlight concluded that it is not probable that Moonlight will be responsible for damages and that P150,000 is the best estimate of the damages. >In July 2018, Moonlight Company became involved in a tax dispute with the BIR pertaining to 2017 income tax. December 2018, a judgement for P400,000 was assessed against Moonlight by the tax court. Moonlight is appealing the amount of judgement. The tax advisor and legal counsel of Moonlight feel that it is probable that they can reduce the assessment on appeal by 50%. >Moonlight Company signed as guarantor for P200,000 loan by the BPI to Moonlight Company, a principal supplier of Moonlight. By reason of financial difficulties, it is probable that Moonlight shall pay the P200,000 loan with only 60% recovery anticipated from Moonriver Company. Required: Prepare necessary entries to recognize provision, if any, in each of the transactions above. Moonlight Company has a several contingent liabilities on December 31, 2018. A brief description of each liability given below: >A personal injury liability suit for P500,000 was brought against Moonlight Company in March 2018. The management and legal counsel of Moonlight concluded that it is not probable that Moonlight will be responsible for damages and that P150,000 is the best estimate of the damages. >In July 2018, Moonlight Company became involved in a tax dispute with the BIR pertaining to 2017 income tax. December 2018, a judgement for P400,000 was assessed against Moonlight by the tax court. Moonlight is appealing the amount of judgement. The tax advisor and legal counsel of Moonlight feel that it is probable that they can reduce the assessment on appeal by 50%. >Moonlight Company signed as guarantor for P200,000 loan by the BPI to Moonlight Company, a principal supplier of Moonlight. By reason of financial difficulties, it is probable that Moonlight shall pay the P200,000 loan with only 60% recovery anticipated from Moonriver Company. Required: Prepare necessary entries to recognize provision, if any, in each of the transactions above.

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First we need to be aware of certain things 1 Meaning Conditions to account for provision in the boo... View the full answer