A company has a probable loss contingency estimated to be between $100,000 and $200,000. No amount within the range is more likely than any other. What amount should be accrued?

Answer options:

$200,000

$100,000

$150,000

How to approach this question

US GAAP: If Probable + Range + No Best Estimate -> Accrue Minimum. <br/>(Note: IFRS accrues Midpoint).

Full Answer

B.$100,000✓ Correct

Under ASC 450, if a loss is probable and can be reasonably estimated as a range, and no amount is better than another, the MINIMUM amount in the range is accrued. The potential for additional loss is disclosed.

Common mistakes

Using the midpoint (average).

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