Concept explainers
Record contingencies (LO8–5)
Compact Electronics is a leading manufacturer of digital camera equipment. Assume the following transactions occur during the war ended December 31, 2018.
Required:
Record any amounts as a result of each of these contingencies.
1.
2. Compact Electronics is the plaintiff in a $5 million lawsuit filed against a supplier. The suit is in final appeal, and attorneys advise it is virtually certain that Compact Electronics will win and be awarded $3.5 million.
3. In November 2018, Compact Electronics became aware of a design flaw in one of its digital camera models. A product recall appears probable and would likely cost the company $600,000
4. Compact Electronics is the defendant in a patent infringement lawsuit brought by a competitor. It appears reasonably likely Compact Electronics will lose the case, and potential losses are estimated to be in the range of $2.5 to $3.5 million.
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Financial Accounting
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