Authors Academic Press faces three potential contingency situations, described below. Authors’ fiscal year ends December 31, 2021. In August 2021, a worker was injured in an accident, partially as a result of his own negligence. The worker has sued the company for $1.14 million. Legal counsel believes it is reasonably possible that the outcome of the suit will be unfavorable, and that the settlement would cost the company from $285,000 to $570,000. A suit for breach of contract seeking damages of $2,700,000 was filed by an author on October 4, 2021. Legal counsel believes an unfavorable outcome is probable. A reasonable estimate of the award to the plaintiff is between $1.35 million and $2.025 million. No amount within this range is a better estimate of potential damages than any other amount. Authors is the plaintiff in a pending court case. Its lawyers believe it is probable that Authors will be awarded damages of $2.7 million. Required: Determine the appropriate means of reporting each situation for the year ended December 31, 2021, and record any necessary entries. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions. For example, $5.5 million should be entered as 5,500,000.) Record the contingent liability if needed. Transaction General Journal Debit Credit 1 Record the contingent liability if needed.
Authors Academic Press faces three potential contingency situations, described below. Authors’ fiscal year ends December 31, 2021.
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In August 2021, a worker was injured in an accident, partially as a result of his own negligence. The worker has sued the company for $1.14 million. Legal counsel believes it is reasonably possible that the outcome of the suit will be unfavorable, and that the settlement would cost the company from $285,000 to $570,000.
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A suit for breach of contract seeking damages of $2,700,000 was filed by an author on October 4, 2021. Legal counsel believes an unfavorable outcome is probable. A reasonable estimate of the award to the plaintiff is between $1.35 million and $2.025 million. No amount within this range is a better estimate of potential damages than any other amount.
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Authors is the plaintiff in a pending court case. Its lawyers believe it is probable that Authors will be awarded damages of $2.7 million.
Required:
Determine the appropriate means of reporting each situation for the year ended December 31, 2021, and record any necessary entries. (If no entry is required for a transaction/event, select "No
- Record the
contingent liability if needed.Transaction General Journal Debit Credit 1 - Record the contingent liability if needed.
Transaction General Journal Debit Credit 2 - Record the contingent gain if needed.
Transaction General Journal Debit Credit 3
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