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When A Ltd secured ownership of all the shares of B Ltd, B Ltd was...

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Accounting

When A Ltd secured ownership of all the shares of B Ltd, B Ltd was involved in a court case with a former employee. B Ltd disclosed this information as a contingent liability in its accounts, and the companys solicitor determined the fair value of the probable payout to settle the case would be $120,000.

Discuss if an adjustment is required on consolidation for a contingent liability and why? If an adjustment is required show the necessary journal entry.

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