At April 1, 2019, the Food and Drug Administration is in the process of investigating allegations of false marketing claims by Hulkly Muscle Supplements. The FDA has not yet proposed a penalty assessment. Hulkly’s fiscalyear ends on December 31, 2018. The company’s financial statements are issued in April 2019.Required:For each of the following scenarios, determine the appropriate way to report the situation. Explain your reasoningand prepare any necessary journal entry.1. Management feels an assessment is reasonably possible, and if an assessment is made, an unfavorable settlement of $13 million is reasonably possible.2. Management feels an assessment is reasonably possible, and if an assessment is made, an unfavorable settlement of $13 million is probable.3. Management feels an assessment is probable, and if an assessment is made, an unfavorable settlement of$13 million is reasonably possible.4. Management feels an assessment is probable, and if an assessment is made, an unfavorable settlement of$13 million is probable.
At April 1, 2019, the Food and Drug Administration is in the process of investigating allegations of false marketing claims by Hulkly Muscle Supplements. The FDA has not yet proposed a penalty assessment. Hulkly’s fiscal
year ends on December 31, 2018. The company’s financial statements are issued in April 2019.
Required:
For each of the following scenarios, determine the appropriate way to report the situation. Explain your reasoning
and prepare any necessary
1. Management feels an assessment is reasonably possible, and if an assessment is made, an unfavorable settlement of $13 million is reasonably possible.
2. Management feels an assessment is reasonably possible, and if an assessment is made, an unfavorable settlement of $13 million is probable.
3. Management feels an assessment is probable, and if an assessment is made, an unfavorable settlement of
$13 million is reasonably possible.
4. Management feels an assessment is probable, and if an assessment is made, an unfavorable settlement of
$13 million is probable.
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