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Your company has just been names in as a defendant in a lawsuit because of an accident. The plaintiff is suing for $400,000 in damages. You have contacted legal counsel and the attorneys have advised your company that the loss could range from $50,000 to $350,000 and no amount in the range is more likely than any other amount in the range. The attorney said the lawsuit will not come up in court until next year about April. Prepare a brief accounting memo and an email to the CEO using the FASB codification as guidance to answer the following: 1. In general, how does a company account for these kind of losses? 2. Explain whether a loss should be accrued and if so for what amount. 3. Any disclosures that are required.

Your company has just been names in as a defendant in a lawsuit because of an accident. The plaintiff is suing for $400,000 in damages. You have contacted legal counsel and the attorneys have advised your company that the loss could range from $50,000 to $350,000 and no amount in the range is more likely than any other amount in the range. The attorney said the lawsuit will not come up in court until next year about April. Prepare a brief accounting memo and an email to the CEO using the FASB codification as guidance to answer the following: 1. In general, how does a company account for these kind of losses? 2. Explain whether a loss should be accrued and if so for what amount. 3. Any disclosures that are required.

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter4: The Balance Sheet And The Statement Of Shareholders' Equity
Section: Chapter Questions
Problem 5C: It is February 16, 2020, and you are auditing Davenport Corporation's financial statements for 2019...
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Your company has just been names in as a defendant in a lawsuit because of an accident. The plaintiff is suing for $400,000 in damages. You have contacted legal counsel and the attorneys have advised your company that the loss could range from $50,000 to $350,000 and no amount in the range is more likely than any other amount in the range. The attorney said the lawsuit will not come up in court until next year about April. Prepare a brief accounting memo and an email to the CEO using the FASB codification as guidance to answer the following: 1. In general, how does a company account for these kind of losses? 2. Explain whether a loss should be accrued and if so for what amount. 3. Any disclosures that are required.
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