On January 5, 2022, a company received a P5,000,000-
Transcribed Image Text:
On January 5, 2022, a company received a P5,000,000-
complaint from one of its employees who suffered an accident
last December 31, 2021, while in the production department.
The company's legal counsel believed it would probably lose the
case and the best estimate of the loss was P2,000,000. The
complainant offered an out of court settlement of P3,000,000
but the company did not accept. On February 1, 2022, the court
ordered the company to pay P2,500,000. The company paid the
employee on February 10, 2022. The company's P10,000,000
comprehensive insurance policy has P1,000,000 deductible
clauses. The company's financial statements were issued on
March 15, 2022. What amount of liability from lawsuit should
the company recognize in its December 31, 2021 statement of
financial position?
