Your classmate owns a business and they are aware that you\'re taking an account

Question

Your classmate owns a business and they are aware that you're taking an accounting class at the moment so they are seeking out your advice. An accident recently took place where an employee was injured and a settlement is reasonably expected to be owed to the injured employee. The problem is that your classmate doesn't know what the amount of the liability should be (if any at all). Remove the aforementioned amounts and comment on which you believe is the appropriate liability to record and why

: 1) Business owner believes liability should be $50,000

2) Friend of business owner believes liability should be no more than $40,000

3) Injured employees doctor bills total $45,000 4) Injured employees attorney is suing for $120,000

5) Lawyer for business estimates liability to be $60,000 6) CPA for business estimates liability to be $50,000

Explanation / Answer

THE MOST APPROPRIATE PERSON TO DECIDE WILL BE A CPA. BECAUSE HE VERY WELL KNOWS WHAT ARE THE DIFFERENT BENEFITS THAT CAN BE GIVEN TO THE EMPLOYEE OUT OF THE FOLLOWING FOUR BENEFITS:

1. WEEKLY COMPENSATION

2. PERMANENT IMPAIRMENT BENEFITS

3. PAYMENT OF MEDICAL BILLS.

4. VOCATIONAL REHABILITATION.

THE CPA WILL DECIDE WHAT AMOUNT CAN BE GIVEN UNDER DIFFERENT HEADS IF APPLICABLE.

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