Homework Answers
Claim 1: if possibility of lawsuit being successful is "possible" it means there is less than 50% likely chance of the lawsuit being successful . In such cases no accounting entry is required but only disclosure is required.
Claim 2: where the amount of damages cannot be reasonably estimated, even if the event of lawsuit being successful is probable, no accounting entry is to be passed.
Claim 3: where the event of lawsuit being successful is probable, it means there is a more than 50% chance of the event materializing, and since the amount of damages can also be reasonably estimated, so the accounting entry can be passed.
The accounting entry will be :
Law suit expense account Debit $1 million
Liability for law suit Credit $ 1 million
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5 Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below....
5
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5
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2018 financial statements are issued on March 15, 2019. a. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2019, judgment was rendered against Eastern in the amount of $117 million plus interest, a total of $132 million. Eastern plans to appeal the judgment and is unable to predict...
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Need to figure out part b.
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94 93% 10:34 AM Tue Heb 25 UJ CONTINYLIILILJ LO13-59, LO13-6 @ Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2018 financial statements are issued on March 15, 2019. a. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2019, judgment was rendered against Eastern in the amount of $107 million plus interest, a total of $122 million....
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