Below are two independent situations. Discuss the proper accounting treatment, including any required disclosures, for each situation. Give the rationale for your answers. In August, 2022, a worker was injured in the factory in an accident, partially the result of his own negligence. The worker has sued Mikell Co. for $800,000. Counsel believes it is reasonably possible that the outcome of the suit will be unfavorable and the settlement would cost the company from $250,000 to $500,000 A suit for breach of contract seeking damages of $2,000,000 was filed by an author against Kenley Company on October 4, 2022. Kenley’s legal counsel believes that an unfavorable outcome is probable. A reasonable estimate of the award to the plaintiff is between $500,000 and $1,500,000. No amount within this range is a better estimate of potential damages than any other amount.
Below are two independent situations. Discuss the proper accounting treatment, including any required disclosures, for each situation. Give the rationale for your answers. In August, 2022, a worker was injured in the factory in an accident, partially the result of his own negligence. The worker has sued Mikell Co. for $800,000. Counsel believes it is reasonably possible that the outcome of the suit will be unfavorable and the settlement would cost the company from $250,000 to $500,000 A suit for breach of contract seeking damages of $2,000,000 was filed by an author against Kenley Company on October 4, 2022. Kenley’s legal counsel believes that an unfavorable outcome is probable. A reasonable estimate of the award to the plaintiff is between $500,000 and $1,500,000. No amount within this range is a better estimate of potential damages than any other amount.
Chapter12: Current Liabilities
Section: Chapter Questions
Problem 6PA: Machine Corp. has several pending lawsuits against its company. Review each situation and (1)...
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- Below are two independent situations. Discuss the proper accounting treatment, including any required disclosures, for each situation. Give the rationale for your answers.
- In August, 2022, a worker was injured in the factory in an accident, partially the result of his own negligence. The worker has sued Mikell Co. for $800,000. Counsel believes it is reasonably possible that the outcome of the suit will be unfavorable and the settlement would cost the company from $250,000 to $500,000
- A suit for breach of contract seeking damages of $2,000,000 was filed by an author against Kenley Company on October 4, 2022. Kenley’s legal counsel believes that an unfavorable outcome is probable. A reasonable estimate of the award to the plaintiff is between $500,000 and $1,500,000. No amount within this range is a better estimate of potential damages than any other amount.
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