Reference no: EM132738952

Question - Poliska SA. in preparation of its December 31, 2019, financial statements is attempting to determine the proper accounting treatment for each of the following situations:

1. As a result of uninsured accidents during the year, personal injury suits for P350,000 and P60,000 have been filed against the company. It is the judgment of Poliska's legal counsel that an unfavorable outcome is unlikely in the P60,000 case but that an unfavorable verdict approximating P250.000 will probably result in the P350,000 case.

2. Poliska Corporation owns a subsidiary in a foreign country that has a book value of P5,725,000 and an estimated tair vahue ot P9,500,000. The foreign government has communicated to Poliska its intention to expropriate the assets and business of all foreign investors. On the basis of settlement other firms have received from this same country. it is virtually certain that Poliska will receive 40% of the fair value of its property and final settlement.

3. Poliska's chemical product division consisting of five plants is uninsurable because of the special risk of injury to employees and losses due to fire and explosion. The year 2019 is considered one of the safest (luckiest) in the division's history because no loss due to injury or casualty was suffered. Having suffered an average of three casualties a year during the rest of the past decade (ranging from P60,000 to P70,000), management is certain that next year the company will probably not be so fortunate

4. Poliska operates profitably from a factory it has leased. During 2019. Poliska decides to relocate these operations to a new factory. The lease of the old factory continues for the next 5 years. The lease cannot be cancelled and the factory cannot be subleased Poliska determines that the cost to settle the old lease is P950.000 5. Litigation is being pursued for the recovery of P1,300,000 consulting fees ont a tailed project. The directors believe it is more likely than not that their claim will be successful

Required -

A. Prepare the journal entries that should be recorded as of December 31, 2019, to recognize each of the situation above.

B. Indicate what should be reported relative to each situation in the financial statements and accompanying notes. Explain why.