Grim Corporation operates a plant in a foreign country. It is probable that the plant will be expropriated. However, the foreign government has indicated that Grim will receive a definite amount of compensation for the plant. The amount of compensation is less than the fair market value but exceeds the carrying amount of the plant. The contingency should be reported in

a. The notes to the financial statements.

b. The income statement.

c. An equity valuation allowance account.

d. A fixed asset valuation allowance account.

Question

Business

Dominic Michael

27 February, 09:35

Grim Corporation operates a plant in a foreign country. It is probable that the plant will be expropriated. However, the foreign government has indicated that Grim will receive a definite amount of compensation for the plant. The amount of compensation is less than the fair market value but exceeds the carrying amount of the plant. The contingency should be reported in

a. The notes to the financial statements.

b. The income statement.

c. An equity valuation allowance account.

d. A fixed asset valuation allowance account.

+3

Answers (1)

Know the Answer?

Abdullah Butler · Answer 1

a.

Explanation:

Based on the scenario being described within the question it can be said that the contingency should be reported in the notes to the financial statements. This is because this is technically a gain contingency and they are only reported in the notes and are not recognized within the financial statements of the corporations operations. Therefore the answer in this scenario would be A.