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3 September, 21:21

Melbourne Inc. is involved in a tax dispute with the national tax authority. Melbourne's legal counsel indicates that there is a 70 percent likelihood that the company will lose this dispute and estimates that the amount the company will have to pay is between $500,000 and $700,000, with all amounts in that range being equally likely. What amount, if any, should Melbourne recognize as a provision related to this tax dispute?

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  1. 3 September, 23:19
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    Melbourne should recognize $600,000 as a provision related to this tax dispute.

    Explanation:

    amount to be recognized as a provision related to this tax dispute

    = ($500,000 + $700,000) / 2

    = $600,000

    Therefore, Melbourne should recognize $600,000 as a provision related to this tax dispute.
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