Harrington Company was sued by an employee in late 2020. General counsel concluded that there was an 80 percent probability that the company would lose the lawsuit. The range of possible loss is estimated to be $21,100 to $73,850, with no amount in the range more likely than any other. The lawsuit was settled in 2021, with Harrington making a payment of $63,300. Assume that Harrington Company is a U.S.- based company that is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes. Required: Prepare journal entries for this lawsuit for the years ending December 31, 2020, and December 31, 2021, under (1) U.S. GAAP and (2) IFRS. Prepare the entry(ies) that Harrington would make on the December 31, 2020, and December 31, 2021, conversion worksheets to convert U.S. GAAP balances to IFRS.

Harrington Company was sued by an employee in late 2020. General counsel concluded that there was an 80 percent probability that the company would lose the lawsuit. The range of possible loss is estimated to be $21,100 to $73,850, with no amount in the range more likely than any other. The lawsuit was settled in 2021, with Harrington making a payment of $63,300. Assume that Harrington Company is a U.S.- based company that is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes. Required: Prepare journal entries for this lawsuit for the years ending December 31, 2020, and December 31, 2021, under (1) U.S. GAAP and (2) IFRS. Prepare the entry(ies) that Harrington would make on the December 31, 2020, and December 31, 2021, conversion worksheets to convert U.S. GAAP balances to IFRS.

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

Harrington Company was sued by an
employee in late 2020. General counsel
concluded that there was an 80 percent
probability that the company would lose the
lawsuit. The range of possible loss is
estimated to be $21,100 to $73,850, with no
amount in the range more likely than any
other. The lawsuit was settled in 2021, with
Harrington making a payment of $63,300.
Assume that Harrington Company is a U.S.-
based company that is issuing securities to
foreign investors who require financial
statements prepared in accordance with IFRS.
Thus, adjustments to convert from U.S. GAAP
to IFRS must be made. Ignore income taxes.
Required:
Prepare journal entries for this lawsuit for the
years ending December 31, 2020, and
December 31, 2021, under (1) U.S. GAAP and
(2) IFRS.
Prepare the entry(ies) that Harrington would
make on the December 31, 2020, and
December 31, 2021, conversion worksheets to
convert U.S. GAAP balances to IFRS.

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