Finance

Have Finance Questions? Ask a Financial Expert Online.

Ask an Expert,
Get an Answer ASAP!

Finance

2.(TCO D) Below are three independent situations. - In August,

Customer Question
2.(TCO D) Below are three...
2.(TCO D) Below are three independent situations.
- In August, 2010, a worker was injured in the factory in an accident partially as the result of his own negligence. The worker has sued Wesley Co. for $800,000. Counsel believes it is reasonably possible that the outcome of the suit will be unfavorable and that the settlement would cost the company from $250,000 to $500,000. 2. A suit for breach of contract seeking damages of $2,400,000 was filed by an author against Greer Co. on October 4, 2010. Greer's legal counsel believes that an unfavorable outcome is probable. A reasonable estimate of the award to the plaintiff is between $600,000 and $1,800,000. No amount within this range is a better estimate of potential damages than any other amount.
- Quinn is involved in a pending court case. Peete's lawyers believe it is probable that Quinn will be awarded damages of $1,000,000.
Instructions:
Discuss the proper accounting treatment, including any required disclosures, for each situation. Give the rationale for your answers.
Submitted: 4 years ago.Category: Finance
Show More
Show Less
Ask Your Own Finance Question
Answered in 2 minutes by:
2/3/2013
Financial Professional: Rakhi Vasavada, Financial and Legal Consultant replied 4 years ago
Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4,545
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Verified

rakhivasavada :

Dear Friend, Hello and welcome..

rakhivasavada :

I believe these are all real life situations.

rakhivasavada :

In the first case the possible settlement amount should be entered as a contingent liability in my opinion. A contingent liability is a potential loss that may occur at some point in the future, once various uncertainties have been resolved. A contingent liability is not yet an actual, confirmed liability.

rakhivasavada :

Record a contingent liability when it is probable that the loss will occur, and you can reasonably estimate the amount of the loss. If you can only estimate a range of possible amounts, then record that amount in the range that appears to be a better estimate than any other amount; Disclose the existence of the contingent liability in the notes accompanying the financial statements if the liability is reasonably possible but not probable, or if the liability is probable, but you cannot estimate the amount

rakhivasavada :

The second instance too is a case of contingent liability.

rakhivasavada :

However, here, the company has arrived at "reasonable amount:. So, here too contingent liability would be recorded in the similar fashion, disclosed in the foot notes and recorded in the following manner.

rakhivasavada :

When liability is contingent

Legal Expense / settlement A/C DR
To Accrued Liabilities

rakhivasavada :

When it is actually paid out,

rakhivasavada :

Accrued Liabilities A/c DR
To Cash

rakhivasavada :

Rate this answer POSITIVELY IF you are done with this and if this helps and satisfies you as this is the only way we get compensated for assisting you. You may use "CONTINUE CONVERSATION" to revert with additional queries if you have or if I have missed out on any aspect of your question.

rakhivasavada :

Are you there friend ?

Ask Your Own Finance Question
Ask Rakhi Vasavada Your Own Question
Rakhi Vasavada
Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4,545
4,545 Satisfied Customers
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years

Rakhi Vasavada is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Rakhi Vasavada

Rakhi Vasavada

Financial and Legal Consultant

4,545 satisfied customers

Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years

Megan C

Megan C

Certified Public Accountant (CPA)

2,218 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

Manal Elkhoshkhany

Manal Elkhoshkhany

Tutor

1,919 satisfied customers

More than 5000 online tutoring sessions.

JKCPA

JKCPA

CPA

844 satisfied customers

Bachelors degree and CPA with Accounting experience.

Eric

Eric

Financial Manager

559 satisfied customers

Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.

R. Klein, EA

R. Klein, EA

Accountant

480 satisfied customers

TurboTax Expert. QuickBooks Certified Pro Advisor

Dimitry K., Esq.

Dimitry K., Esq.

Attorney

332 satisfied customers

NASD Licensed Rep, 1997-2001, Business Attorney

< Previous | Next >

Related Finance Questions
I own a company with the stock symbol AGNC. I am looking for
I own a company with the stock symbol AGNC. I am looking for advice on whether or not this stock has a high probability of bankruptcy. I've owned it for over 6 years and currently have a paper loss. I… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
726 satisfied customers
What would the best life insurance policy be and my partner
What would the best life insurance policy be it's me and my partner his earning potential ya about 150k per year mine is about 40k . We are both in our late 30s with little savings. We still rent and … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,463 satisfied customers
I have a film production company LLC registered in Florida.
I have a film production company LLC registered in Florida. However, my husband and I just moved to Colorado. I'm putting together a co-production deal with a company out of Indiana. We'll be doing th… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,463 satisfied customers
I have set up an llc for the sole purpose of owning shares
I have set up an llc for the sole purpose of owning shares in a C-corp. The C-corp currently has no business activity and a value based on 44 million shares and par value of 0.00001$/share. The C-corp… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I am receiving a payment from my prior employment disability
I am receiving a payment from my prior employment disability insurance. Will I be taxed for that? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,463 satisfied customers
I'm getting ready to get a home equity line of credit. I own
I'm getting ready to get a home equity line of credit. I own my home outright and have no other liens. I plan to get about $ 50,000 line of credit, which is about 30% of home value. I plan to use proc… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
726 satisfied customers
I am considering, possibly, moving my 401k to a IRA. I am
I am considering, possibly, moving my 401k to a IRA. I am just in the starting phase of this. I still need to speak with my accountant.The retirement company that handles my account has sent, at my re… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I have a Texas LLC and we sell agricultural parts for
I have a Texas LLC and we sell agricultural parts for tractors, we have a contract manufacturer make our proprietary parts, then sell them to farmers. Farmers are obviously tax exempt, but are we also… read more
abci168
abci168
Principal
27 satisfied customers
In 2017 my brother, my sister, and I inherited about 18,000$
In 2017 my brother, my sister, and I inherited about 18,000$ from our Father. The money came from stock shares that our Father left for us in his will. Our Father passed away in 2011. After several ye… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,463 satisfied customers
Have a sub s corp rental properties fully depreciated wish
Have a sub s corp rental properties fully depreciated wish to do a joint venture not a sale or transfer of property.. How can this be done without triggering capital gains? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I have a looming $3000 in s/t cap gain & 34,000 in l/t cap
I have a looming $3000 in s/t cap gain & 34,000 in l/t cap gains & $100k in cash from stock sales.Best way to reduce the tax. Can't I take l/t gains over time. My income this year's was about 35K. I a… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
726 satisfied customers
My wife has a life insurance policy taken out in 1951 by her
my wife has a life insurance policy taken out in 1951 by her parents. it was from the Worcester county institution for savings in Worcester, ma. … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
We are entering into a 5-year lease for our small business
Hello! We are entering into a 5-year lease for our small business and trying to properly account for the leasehold improvements in QB (i.e. architect fees, permit fees, construction costs, and equipme… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I inherited my father's IRAs. I have accounts with Fidelity
I inherited my father's IRAs. I have accounts with Fidelity and Schwab. One of my Schwab accounts is titled Inherited; the other is listed as a Roth. The Fidelity account is listed as an IRA. My quest… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
What is the difference in payments and total interest on a
What is the difference in payments and total interest on a car loan total of $32,000.00 paid off in three years? Interest rate 4.99% vs 2.99%… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
726 satisfied customers
How to negotiate with auto insurance (Progressive) the
how to negotiate with auto insurance (Progressive) the settlement prince on their offer to total my vehicle after the accident. I see only two vehicles of the exact same kind for sale by the dealers o… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,463 satisfied customers
I am an international student in Louisiana. I have been here
I am an international student in Louisiana. I have been here since 2013 and have NOT filed taxes at all. Do I have to wait until next year's tax season to file taxes for all my past years, or can I do… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,463 satisfied customers
I currently have a 20 year home equity loan....i'm looking
I currently have a 20 year home equity loan....i'm looking to lower the monthy payments doing a refi HARP loan in Pennsylvania...is that possible with no appraisal?… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
726 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x