Flashcards: Current Liabilities

Company A has a contingent loss. At the end of Year 1, several possible losses and their probabilities are estimated, including a $130,000 loss (35% chance), $180,000 loss (55% chance), or $80,000 (10% chance). The company also believes it is reasonably possible that the loss could be as high as $230,000. In Year 2, the loss is settled for $172,000. What income statement effect will the company recognize in Year 2?

$10,000 recovery

$15,000 loss

$68,000 recovery

$8,000 recovery

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