Answered: accounting treatment

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

4C.

Stay Safe Bhd (SSB) launched its new product, Super Sanitizer (SS), in January 2021.
SSB faced bad publicity when the news went viral that customers suffered skin flea
allergy dermatitis due to using SS. The client filed a court action in November 2021,
claiming damages of RM150,000. The lawyer had advised SSB that the chances for the
client to win the case are possible. The company paid RM5,000 for the lawyer's service
fee, including RM3,000 for services to be completed in the year 2022.

REQUIRED:
Explain the accounting treatment for the above situation regarding:

i. Lawsuit of RM150,000; and

ii. Professional fees of RM5,000.
Justify your answers.

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