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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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After years of experience, Dilcort Company reasonably estimated that a loss from a pending lawsuit was probable at September 30 of the current year. Dilcort Company estimated that the loss would amount to $57,500. Prepare the journal entry, if any, to record the lawsuit at its September 30 year-end.

To determine

Prepare journal entry to record the lawsuit.

Explanation

Contingent liability:

This is an uncertain obligation which might be incurred on a future date as a result of any past transaction. So, the companies should provide provision for such uncertain liabilities in the financial statements.

Prepare journal entry to record the lawsuit.

DateAccount Titles and explanationDebit ($)Credit ($)
 Loss from litigation 57,500 
 

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