Machine Corp. has several pending lawsuits against its company. Review each situation: A. A pending lawsuit, claiming $120,000 in damages, is considered likely to favor the plaintiff and can be reasonably estimated. B. Machine Corp. believes there might be other potential lawsuits about this faulty machinery, but this is unlikely to occur. C. A claimant sues Machine Corp. for damages, from a dishonored service contract agreement; the plaintiff will likely win the case but damages cannot be reasonably estimated. D. Machine Corp. believes a customer will win a lawsuit it filed, but the outcome is not likely and is not remote. It is possible the customer will win. 1 and 2. Which of the above situations require recognition in the financial statements and which require note disclosure only? a. A must be recognized and requires note disclosure; C and D require note disclosure only. b. All four cases require note disclosure only. c. A, C, and D must be recognized; B requires note disclosure only. d. None of them need to be recognized or disclosed until the result is known. 3. Prepare any journal entries required to recognize a contingent liability. If an amount box does not require an entry, leave it blank. fill in the blank fill in the blank fill in the blank fill in the blank
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Machine Corp. has several pending lawsuits against its company. Review each situation:
A. A pending lawsuit, claiming $120,000 in damages, is considered likely to favor the plaintiff and can be reasonably estimated.
B. Machine Corp. believes there might be other potential lawsuits about this faulty machinery, but this is unlikely to occur.
C. A claimant sues Machine Corp. for damages, from a dishonored service contract agreement; the plaintiff will likely win the case but damages cannot be reasonably estimated.
D. Machine Corp. believes a customer will win a lawsuit it filed, but the outcome is not likely and is not remote. It is possible the customer will win.
1 and 2. Which of the above situations require recognition in the financial statements and which require note disclosure only?
a. A must be recognized and requires note disclosure; C and D require note disclosure only.
b. All four cases require note disclosure only.
c. A, C, and D must be recognized; B requires note disclosure only.
d. None of them need to be recognized or disclosed until the result is known.
3. Prepare any
journal entries required to recognize acontingent liability . If an amount box does not require an entry, leave it blank.fill in the blank fill in the blank fill in the blank fill in the blank
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