Question

something odd in accounting class today ....

Answer 1

lets say it probable that you will be liable for an amount between:

8 000 000 and 1 400 000 ; what amount would you place on the books to record this?

Answer 2

in another scenario; lets say that you are liable for 6 000 000, and have insurance that will cover 9 000 000, with a 500 000 dedeuctable; what amount would you place on the books to record this?

Answer 3

for the first case: i said, 1 400 000 to be conservative ... cover your "retrices"; but the correct answer is: 8 000 000, the lower of the two

for the second case: i said 500 000 since youve got insurance to cover it; but the correct answer was the 6 000 000, the higher of the two.

Answer 4

why is it not consistently the higher or lower of the two values ?