Ans : Loss from expropriation A/c. $ 39,00,000
To allowance for expropriation $ 39,00,000
[ $ 1,29,00,000 - ( 60% x $ 1,50,00,000)]
An entry to record a loss and establish an allowance due to threat of expropriation necessary because expropriation is imminent as evidenced by the foreign government's communicated intent to expropriate and the prior settlement for properties already expropriated. That is enough evidence exists to reasonably estimate the amount of the probable loss resulting from the impairment of assets at the balance sheet date. The amount of loss is measured by the amount that the carrying amount ( book value) of the assets exceeds the expected compensation. At the time the expropriation occurs the related assets are written off against the allowance account.
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