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.

The contingent liability of the lawsuit should only be recognized when the amount of liability can…

Answered: On April 13th 2022: K.C. is sued for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

On April 13^th 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 18^th 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 28^th 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.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Accounting for Current liabilities, Provisions and Contingencies

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions