Question

Mark Ward is a farmer who owns land which borders on the right-of-way of the Northern Railroad. On August 10, 2007, due to the admitted negligence of the Railroad, hay on the farm was set on fire and burned. Ward had had a dispute with the Railroad for several years concerning the ownership of a small parcel of land. The representative of the Railroad has offered to assign any rights which the Railroad may have in the land to Ward in exchange for a release of his right to reimbursement for the loss he has sustained from the fire. Ward appears inclined to accept the Railroad's offer. The Railroad's 2007 financial statements should include the following related to the incident:_________
A. recognition of a loss and creation of a liability for the value of the land.
B. disclosure in note form only.
C. recognition of a loss only.
D. creation of a liability only.

Answer 1

Answer:

A. recognition of a loss and creation of a liability for the value of the land.

Explanation:

This is because, in the financial statement of the Railroad company, it goes to show the financial dealings which the company had within the fiscal year under review. Since, the Northern Railroad Company and Mark Ward has reached an agreement, the best would be the recognition of the loss and create a liability for the value of the land in their financial statement. It will afford the investors to be aware of the assets and liability of the company at the present time.