Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2021 financial statements are issued on March 15, 2022. a. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2022, judgment was rendered against Eastern in the amount of $116 million plus interest, a total of $131 million. Eastern plans to appeal the judgment and is unable to predict its outcome though it is not expected to have a material adverse effect on the company. b. In November 2020, the State of Nevada filed suit against Eastern, seeking civil penalties and injunctive relief for violations of environmental laws regulating hazardous waste. On January 12, 2022, Eastern reached a settlement with state authorities. Based upon discussions with legal counsel, the Company feels it is probable that $149 million will be required to cover the cost of violations. Eastern believes that the ultimate settlement of this claim will not have a material adverse effect on the company. c. Eastern is the plaintiff in a $209 million lawsuit filed against United Steel for damages due to lost profits from rejected contracts and for unpaid receivables. The case is in final appeal and legal counsel advises that it is probable that Eastern will prevail and be awarded $150 million. d. At March 15, 2022, Eastern knows a competitor has threatened litigation due to patent infringement. The competitor has not yet filed a lawsuit. Management believes a lawsuit is reasonably possible, and if a lawsuit is filed, management believes damages of up to $42 million are reasonably possible. Required: 1. Determine the appropriate way to report each situation. 2. Prepare the appropriate journal entries for these situations. Complete this question by entering your answers in the tabs below.
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2021 financial statements are issued on March 15, 2022. a. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2022, judgment was rendered against Eastern in the amount of $116 million plus interest, a total of $131 million. Eastern plans to appeal the judgment and is unable to predict its outcome though it is not expected to have a material adverse effect on the company. b. In November 2020, the State of Nevada filed suit against Eastern, seeking civil penalties and injunctive relief for violations of environmental laws regulating hazardous waste. On January 12, 2022, Eastern reached a settlement with state authorities. Based upon discussions with legal counsel, the Company feels it is probable that $149 million will be required to cover the cost of violations. Eastern believes that the ultimate settlement of this claim will not have a material adverse effect on the company. c. Eastern is the plaintiff in a $209 million lawsuit filed against United Steel for damages due to lost profits from rejected contracts and for unpaid receivables. The case is in final appeal and legal counsel advises that it is probable that Eastern will prevail and be awarded $150 million. d. At March 15, 2022, Eastern knows a competitor has threatened litigation due to patent infringement. The competitor has not yet filed a lawsuit. Management believes a lawsuit is reasonably possible, and if a lawsuit is filed, management believes damages of up to $42 million are reasonably possible. Required: 1. Determine the appropriate way to report each situation. 2. Prepare the appropriate journal entries for these situations. Complete this question by entering your answers in the tabs below.
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter8: Liabilities And Stockholders' Equity
Section: Chapter Questions
Problem 8.2.1C
Related questions
Question
Transcribed Image Text:A https://ezto.mheducation.com/ext/map/index.html?_con%3Dcon&external_browser=0&launchUrl=https%253A%2... ☆
- Apply: Current and Long-Term Liabilities ... G
Saved
Help
Save & Exit
Submit
1
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal
year ends December 31, and the 2021 financial statements are issued on March 15, 2022.
a. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2022, judgment was rendered against
Eastern in the amount of $116 million plus interest, a total of $131 million. Eastern plans to appeal the judgment and is unable to
predict its outcome though it is not expected to have a material adverse effect on the company.
b. In November 2020, the State of Nevada filed suit against Eastern, seeking civil penalties and injunctive relief for violations of
environmental laws regulating hazardous waste. On January 12, 2022, Eastern reached a settlement with state authorities. Based
upon discussions with legal counsel, the Company feels it is probable that $149 million will be required to cover the cost of
violations. Eastern believes that the ultimate settlement of this claim will not have a material adverse effect on the company.
C. Eastern is the plaintiff in a $209 million lawsuit filed against United Steel for damages due to lost profits from rejected contracts and
for unpaid receivables. The case is in final appeal and legal counsel advises that it is probable that Eastern will prevail and be
awarded $150 million.
d. At March 15, 2022, Eastern knows a competitor has threatened litigation due to patent infringement. The competitor has not yet
filed a lawsuit. Management believes a lawsuit is reasonably possible, and if a lawsuit is filed, management believes damages of up
to $42 million are reasonably possible.
Required:
1. Determine the appropriate way to report each situation.
2. Prepare the appropriate journal entries for these situations.
Complete this question by entering your answers in the tabs below.
1 of 8
Next >
Prev
nere to search
DELL
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
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.Recommended textbooks for you
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Financial Accounting
Accounting
ISBN:
9781305088436
Author:
Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Business/Professional Ethics Directors/Executives…
Accounting
ISBN:
9781337485913
Author:
BROOKS
Publisher:
Cengage
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Financial Accounting
Accounting
ISBN:
9781305088436
Author:
Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Business/Professional Ethics Directors/Executives…
Accounting
ISBN:
9781337485913
Author:
BROOKS
Publisher:
Cengage
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning