Viking manufacturing inc

On February 1, 2016, one of the huge storage tanks of Viking Manufacturing Company exploded.

Windows in houses and other buildings within a one-mile radius of the explosion were severely damaged, and a number of people were injured. As of February 15, 2016 (when the December 31, 2015, financial statements were completed and sent to the publisher for printing and public distribution), no suits had been filed or claims asserted against the company as a consequence of the explosion. The company fully anticipates that suits will be filed and claims asserted for injuries and damages. Because the casualty was uninsured and the company considered at fault, Viking Manufacturing will have to cover the damages from its own resources.

Instructions

Discuss fully the accounting treatment and disclosures that should be accorded the casualty and related contingent losses in the financial statements dated December 31, 2015.

Just do response each posted # 1 to 3 down below only

Posted 1

Viking Manufacturing Company should make note of any potential suits, claims, and damages in the financial statement for December 31, 2015. Even though there aren’t any claims filed to date at the time of the financial statements release, Viking anticipates that there will be. To report a loss and a liability in the financial statements, the cause for litigation must have occurred on or before the date of the financial statements. It does not matter that the company became aware of the existence or possibility of the lawsuit or claims after the date of the financial statements but before issuing them. (Kieso, Weygant, & Warfield, 2016)

Since this happened in February of 2016 a loss contingency needs to be in the December 31, 2016 financial statements. At this time Viking would be able to better assess the damages to the Vikings property, potential civil property expenses and suits that Viking will incur since they didn’t have casualty insurance.