Question

E13-21 Various transactions inv ous transactions involving contingen The following selected circumstances relate ends on December 31. Financial statements are statements according to U.S. GAAP. relate to pending lawsuits for Erismus, Inc. Erismus ents are issued in March 2022. Erismus prepares its nus, Inc. Erismus's fiscal year ismus prepares its financial Required: Indicate the amount Erismus would record as an in the following circumstances. an asset, a liability or if no accrual would be necessary went believes the company has a slightly y prevailing in court, and that if it loses, the judgment will be 1. Erismus is defending against a laws luing against a lawsuit. Erismus's management believes worse than 50/50 chance of eventually prevailin $1,000,000. 2. Erismus is defending against a lawsuit. En company will lose in court. If it loses, management range of $2,000,000 to $4,000,000, with any damage in 3. Erismus is defending against a lawsuit. Enism company will lose in court. If it loses, management $5,000,000, with a present value of $3,500,000. 4. Erismus is a plaintiff in a lawsuit. Erismus's me believes it is probable that the Tall anywhere in the against a lawsuit. Erismus's management believes it is probable 0,000 to $4,000,000, with any damage in that range equally likely. oses, management believes that damages could fall anywhere m court. If it loses, management believes that damages will eventually s management believes it is probable that the nagement believes it is probable that the company entually will prevail in court, and that if it prevails, the judgment will be $1,000,00 5. Erismus is a plaintiff in a lawsuit. Erismus's management believes it is virtually company eventually will prevail in court, and that if it prevails, the judgment will be poco ment believes it is virtually certain that the 06 bal Classification Amount 2 3

Answer 1

Answer-

	Classification	Amount
1	Not Accrued Explanation:- Estimated from loss contingency is accrued when both the conditions below are satisfied: it is probable that a liability has been incurred as of the date of the financial statements and the amount of the loss can be reasonably estimated.	-
2	Liability Explanation:- Estimated from loss contingency is accrued when both the conditions below are satisfied: it is probable that a liability has been incurred as of the date of the financial statements and the amount of the loss can be reasonably estimated.	$2,000,000
3	Liability Explanation:- Estimated from loss contingency is accrued when both the conditions below are satisfied: it is probable that a liability has been incurred as of the date of the financial statements and the amount of the loss can be reasonably estimated.	$5,000,000
4	Not Accrued Explanation:- Contingencies that might result in gains are usually not reflected in accounts.	-
5	Not Accrued Explanation:- Contingencies that might result in gains are usually not reflected in accounts.	-