A hospital that carries no malpractice insurance has several outstanding malpractice claims, including one for $1.5 million
Hospital attorneys believe the claim can be settled in the range of $200,000 to $340,000, but negotiations have not reached the point where they can estimate where within that range they can reach agreement. How should the hospital handle this claim in its financial statements?
a. report nothing on the face of the statements; in the notes, state that there are claims against the hospital, and that historically it wins some cases and loses others.
b. report an expense and a liability of $270,000, the mid-point of the range.
c. report an expense and a liability of $340,000, the upper end of the range.
d. report an expense and a liability of $200,000, the lower end of the range, and disclose the potential for additional loss in the notes to the statements.
d
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