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Oscar is an accounting co-op student. He is presently working on the 2021 financial statements for Simon Company and encountered the below situations. Simon has a December 31 fiscal year-end and is a public company. a) Provision for Loss Due to Lawsuit...... Provision for Liability Due to Lawsuit. 10,000,000 To setup a loss/liability as the company is being sued by a former employee for $10,000,000. Our lawyers say it is probable that we will lose the case and that $10,000,000 is a reasonable estimate of what we will have to pay. ........ 10,000,000 b) No entry and no note disclosure. Simon Company is being sued due to a workplace accident. Our lawyers say that it is not determinable at this time whether we will win or lose the lawsuit. d) Provision for Loss Due to Lawsuit... c) Note disclosure. The company may suffer substantial financial losses due to the possibility of a recession in 2022. ***** e) Provision for Gain Due to Lawsuit....... Provision for Receivable Due to Lawsuit... Provision for Liability Due to Lawsuit.. 15,000,000 To set up a loss/liability as the company is being sued due to a defective product. Our lawyers say that it is unlikely that we will lose the lawsuit and need to pay $15,000,000 (best estimate if did lose the lawsuit - would have substantial negative effect on the company). 15,000,000 .…………………………….….…….. 7,000,000 7,000,000 To set up an asset/gain related to a lawsuit that Simon has filed against another company. Our lawyers say that it is virtually certain that we will win the lawsuit and receive $7,000,000..

Oscar is an accounting co-op student. He is presently working on the 2021 financial statements for Simon Company and encountered the below situations. Simon has a December 31 fiscal year-end and is a public company. a) Provision for Loss Due to Lawsuit...... Provision for Liability Due to Lawsuit. 10,000,000 To setup a loss/liability as the company is being sued by a former employee for $10,000,000. Our lawyers say it is probable that we will lose the case and that $10,000,000 is a reasonable estimate of what we will have to pay. ........ 10,000,000 b) No entry and no note disclosure. Simon Company is being sued due to a workplace accident. Our lawyers say that it is not determinable at this time whether we will win or lose the lawsuit. d) Provision for Loss Due to Lawsuit... c) Note disclosure. The company may suffer substantial financial losses due to the possibility of a recession in 2022. ***** e) Provision for Gain Due to Lawsuit....... Provision for Receivable Due to Lawsuit... Provision for Liability Due to Lawsuit.. 15,000,000 To set up a loss/liability as the company is being sued due to a defective product. Our lawyers say that it is unlikely that we will lose the lawsuit and need to pay $15,000,000 (best estimate if did lose the lawsuit - would have substantial negative effect on the company). 15,000,000 .…………………………….….…….. 7,000,000 7,000,000 To set up an asset/gain related to a lawsuit that Simon has filed against another company. Our lawyers say that it is virtually certain that we will win the lawsuit and receive $7,000,000..

FINANCIAL ACCOUNTING
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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Oscar is an accounting co-op student. He is presently working on the 2021 financial statements for Simon Company and encountered the below situations. Simon has a December 31 fiscal year-end and is a public company. a) Provision for Loss Due to Lawsuit... Provision for Liability Due to Lawsuit. 10,000,000 To setup a loss/liability as the company is being sued by a former employee for $10,000,000. Our lawyers say it is probable that we will lose the case and that $10,000,000 is a reasonable estimate of what we will have to pay. b) No entry and no note disclosure. Simon Company is being sued due to a workplace accident. Our lawyers say that it is not determinable at this time whether we will win or lose the lawsuit. 10,000,000 c) Note disclosure. The company may suffer substantial financial losses due to the possibility of a recession in 2022. d) Provision for Loss Due to Lawsuit.. Provision for Liability Due to Lawsuit. Provision for Gain Due to Lawsuit... 15,000,000 15,000,000 To set up a loss/liability as the company is being sued due to a defective product. Our lawyers say that it is unlikely that we will lose the lawsuit and need to pay $15,000,000 (best estimate if did lose the lawsuit - would have substantial negative effect on the company). 7,000,000 Provision for Receivable Due to Lawsuit... 7,000,000 To set up an asset/gain related to a lawsuit that Simon has filed against another company. Our lawyers say that it is virtually certain that we will win the lawsuit and receive $7,000,000.
Transcribed Image Text:Oscar is an accounting co-op student. He is presently working on the 2021 financial statements for Simon Company and encountered the below situations. Simon has a December 31 fiscal year-end and is a public company. a) Provision for Loss Due to Lawsuit... Provision for Liability Due to Lawsuit. 10,000,000 To setup a loss/liability as the company is being sued by a former employee for $10,000,000. Our lawyers say it is probable that we will lose the case and that $10,000,000 is a reasonable estimate of what we will have to pay. b) No entry and no note disclosure. Simon Company is being sued due to a workplace accident. Our lawyers say that it is not determinable at this time whether we will win or lose the lawsuit. 10,000,000 c) Note disclosure. The company may suffer substantial financial losses due to the possibility of a recession in 2022. d) Provision for Loss Due to Lawsuit.. Provision for Liability Due to Lawsuit. Provision for Gain Due to Lawsuit... 15,000,000 15,000,000 To set up a loss/liability as the company is being sued due to a defective product. Our lawyers say that it is unlikely that we will lose the lawsuit and need to pay $15,000,000 (best estimate if did lose the lawsuit - would have substantial negative effect on the company). 7,000,000 Provision for Receivable Due to Lawsuit... 7,000,000 To set up an asset/gain related to a lawsuit that Simon has filed against another company. Our lawyers say that it is virtually certain that we will win the lawsuit and receive $7,000,000.
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