Several Years Ago, a Corporation Set Up a Reserve for Storm

question 148

Essay

Several years ago, a corporation set up a reserve for storm losses in the amount of $300,000 as an appropriation of retained earnings.During the current year, the company suffered a $85,000 hurricane loss that was not covered by insurance.The firm reduces appropriations when their purpose has been fulfilled.Give the entry(s)to record the loss and provide any appropriate explanation.

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Definitions:

Management Decision

A choice made by the leadership of an organization that influences its operations or strategy.

Consumer Demand

The desire of purchasers, consumers, clients, or buyers for a product or service in the marketplace.

Long-Term

Pertains to a period extending generally beyond one year, often related to investments, financial planning, or obligations.

Scenario Analysis

A process of analyzing future events by considering alternative possible outcomes (scenarios), often used in investment planning and risk management.