On April 13th 2022: K.C. is sued for cheating its customers by adding ice to cold beverages, thereby reducing the amount of precious liquid contained in the cups. By the time lawsuit occurs, the lawsuit loss is not probable and can not be estimated. On May 18th 2022: K.C. is sued for a week-long insomnia its customer sustained after the customer consumed K.C. signature expresso – The Death Wish. By the time K.C. is served, the lawsuit loss is probable and can be reasonable estimated between $ 90,000 to $ 100,000. On January 28th 2023 (before 2022 financial report is issued): new evidence related to ICE CUBE lawsuit surfaced. K.C.’s ice cube is on average 50% larger than industry standard! Thus, K.C. determines the lawsuit is probable and can be reasonable estimated at $ 15,500. With respect to each of the above events, Should K.C. recognize any gain/loss in its 2022 financial report? If so, what is the correct journal entry (entries) Whether and how should K.C. disclose the pertinent gain/loss in its 2022 financial report.
On April 13th 2022: K.C. is sued for cheating its customers by adding ice to cold beverages, thereby reducing the amount of precious liquid contained in the cups. By the time lawsuit occurs, the lawsuit loss is not probable and can not be estimated. On May 18th 2022: K.C. is sued for a week-long insomnia its customer sustained after the customer consumed K.C. signature expresso – The Death Wish. By the time K.C. is served, the lawsuit loss is probable and can be reasonable estimated between $ 90,000 to $ 100,000. On January 28th 2023 (before 2022 financial report is issued): new evidence related to ICE CUBE lawsuit surfaced. K.C.’s ice cube is on average 50% larger than industry standard! Thus, K.C. determines the lawsuit is probable and can be reasonable estimated at $ 15,500. With respect to each of the above events, Should K.C. recognize any gain/loss in its 2022 financial report? If so, what is the correct journal entry (entries) Whether and how should K.C. disclose the pertinent gain/loss in its 2022 financial report.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
- On April 13th 2022: K.C. is sued for cheating its customers by adding ice to cold beverages, thereby reducing the amount of precious liquid contained in the cups. By the time lawsuit occurs, the lawsuit loss is not probable and can not be estimated.
- On May 18th 2022: K.C. is sued for a week-long insomnia its customer sustained after the customer consumed K.C. signature expresso – The Death Wish. By the time K.C. is served, the lawsuit loss is probable and can be reasonable estimated between $ 90,000 to $ 100,000.
- On January 28th 2023 (before 2022 financial report is issued): new evidence related to ICE CUBE lawsuit surfaced. K.C.’s ice cube is on average 50% larger than industry standard! Thus, K.C. determines the lawsuit is probable and can be reasonable estimated at $ 15,500.
With respect to each of the above events,
- Should K.C. recognize any gain/loss in its 2022 financial report? If so, what is the correct
journal entry (entries) - Whether and how should K.C. disclose the pertinent gain/loss in its 2022 financial report.
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