Nicole, Inc. uses iGAAP for its external financial reporting. During 2009, an em

Question

Nicole, Inc. uses iGAAP for its external financial reporting. During 2009, an employee of the company was injured in the factory. Discussions with corporate attorneys resulted in a determination that the company would be required to pay between $1,000,000 and $2,000,000 to settle the injury claim. Nicole, Inc. accrued a contingent liability on December 31, 2009 for $1,000,000. On February 4, 2011, Nicole, Inc. settled the lawsuit for $2,200,000. What amount of loss should be reported on the income statement for the year ended December 31, 2010 for Nicole, Inc. related to this lawsuit?
a)   $1,200,000
b)   $1,000,000
c)   No extra loss will be recorded in 2010, the remaining loss will be recorded in 2011.
d)   $2,200,000 Thank you Nicole, Inc. uses iGAAP for its external financial reporting. During 2009, an employee of the company was injured in the factory. Discussions with corporate attorneys resulted in a determination that the company would be required to pay between $1,000,000 and $2,000,000 to settle the injury claim. Nicole, Inc. accrued a contingent liability on December 31, 2009 for $1,000,000. On February 4, 2011, Nicole, Inc. settled the lawsuit for $2,200,000. What amount of loss should be reported on the income statement for the year ended December 31, 2010 for Nicole, Inc. related to this lawsuit?
a)   $1,200,000
b)   $1,000,000
c)   No extra loss will be recorded in 2010, the remaining loss will be recorded in 2011.
d)   $2,200,000 Thank you

Explanation / Answer

Nicole, Inc reported loss of $1,000,000 was reported on income statement for the year ended December 31, 2010 because remaining amount was reported in the year 2011 when it is incurred So currect option is b.) $1,000,000

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