You are the accountant for Good Person Company. Your company believes that it has the responsibility to
Question:
You are the accountant for Good Person Company. Your company believes that it has the responsibility to help in its community and therefore is a big supporter of the Boys and Girls Club. Suppose that a few years ago, the Boys and Girls Club borrowed $3 million from Atlas Bank to build a gymnasium to improve the club’s recreational activities. Good Person agreed to guarantee the borrowing, indicating that if the Boys and Girls Club defaulted on the loan, Good Person will pay the remainder of the debt due at the settlement date. Unfortunately, the club defaulted on the loan, and Good Person estimates that its contingent liability on the loan will be $1,800,000 at the settlement date.
What is the entry, if any, to record the loss contingency?
Accounting Principles Part 1
ISBN: 978-1118306789
6th Canadian edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow