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Prepare journal entries that should be recorded as a result of each of the above contingencies.

Prepare journal entries that should be recorded as a result of each of the above contingencies.

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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The following selected transactions relate to contingencies of Bowe-Whitney Incorporated. Bowe-Whitney's fiscal year ends on December 31, 2024, and financial statements are published in March 2025. 1. Bowe-Whitney is involved in a lawsuit resulting from a dispute with a customer over a 2024 transaction. At December 31, attorneys advised that it was probable that Bowe-Whitney would lose $3 million in an unfavorable outcome. On February 12, 2025, judgment was rendered against Bowe-Whitney in the amount of $14 million plus interest, a total of $15.2 million. Bowe- Whitney does not plan to appeal the judgment. 2. Since August of 2024, Bowe-Whitney has been involved in labor disputes at two of its facilities. Negotiations between the company and the unions have not produced a settlement and, since January 2024, strikes have been ongoing at these facilities. It is virtually certain that material costs will be incurred but the amount of resultant costs cannot be adequately predicted. 3. Bowe-Whitney is the defendant in a lawsuit filed in January 2025 in which Access Company seeks $10 million as an adjustment to the purchase price related to the sale of Bowe-Whitney's hardwood division in 2024. The lawsuit alleges that Bowe-Whitney misrepresented the division's assets and liabilities. Legal counsel advises that it is reasonably possible that Bowe-Whitney could lose $5 million, but that it's extremely unlikely it could lose the $10 million asked for. 4. At March 1, 2025, the EPA is in the process of investigating the possibility of environmental violations at one of Bowe-Whitney's sites, but has not proposed a penalty assessment. Management feels an assessment is reasonably possible, and if an assessment is made, a settlement of up to $33 million is probable. Required: Prepare journal entries that should be recorded as a result of each of the above contingencies. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in nearest whole dollars. No 1 2 3 4 Transaction 1 2 3 4 Loss litigation No journal entry required No journal entry required X Answer is not complete. General Journal ✓ ✓ S Debit 15 X 5 X Credit 10 X 1X 5,000,000 X
Transcribed Image Text:The following selected transactions relate to contingencies of Bowe-Whitney Incorporated. Bowe-Whitney's fiscal year ends on December 31, 2024, and financial statements are published in March 2025. 1. Bowe-Whitney is involved in a lawsuit resulting from a dispute with a customer over a 2024 transaction. At December 31, attorneys advised that it was probable that Bowe-Whitney would lose $3 million in an unfavorable outcome. On February 12, 2025, judgment was rendered against Bowe-Whitney in the amount of $14 million plus interest, a total of $15.2 million. Bowe- Whitney does not plan to appeal the judgment. 2. Since August of 2024, Bowe-Whitney has been involved in labor disputes at two of its facilities. Negotiations between the company and the unions have not produced a settlement and, since January 2024, strikes have been ongoing at these facilities. It is virtually certain that material costs will be incurred but the amount of resultant costs cannot be adequately predicted. 3. Bowe-Whitney is the defendant in a lawsuit filed in January 2025 in which Access Company seeks $10 million as an adjustment to the purchase price related to the sale of Bowe-Whitney's hardwood division in 2024. The lawsuit alleges that Bowe-Whitney misrepresented the division's assets and liabilities. Legal counsel advises that it is reasonably possible that Bowe-Whitney could lose $5 million, but that it's extremely unlikely it could lose the $10 million asked for. 4. At March 1, 2025, the EPA is in the process of investigating the possibility of environmental violations at one of Bowe-Whitney's sites, but has not proposed a penalty assessment. Management feels an assessment is reasonably possible, and if an assessment is made, a settlement of up to $33 million is probable. Required: Prepare journal entries that should be recorded as a result of each of the above contingencies. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in nearest whole dollars. No 1 2 3 4 Transaction 1 2 3 4 Loss litigation No journal entry required No journal entry required X Answer is not complete. General Journal ✓ ✓ S Debit 15 X 5 X Credit 10 X 1X 5,000,000 X
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