Dejong's Drycleaning had the following events occur during December, 2014: Dejong is reporting under ASPE.
1. Dejong signed a $40,000 loan guarantee on behalf of Dejong Junior's. At December 31, Junior's had drawn $10,000 of loan advances. Junior's has sufficient assets to cover its liabilities.
2. Dejong was sued by an irate customer who said the trousers that Dejong had returned to him belonged to someone else. The customer is claiming $10,000,000 in damages for distress because he mistakenly wore the ill-fitting trousers to work and suffered discomfort and embarrassment as a result. Dejong's lawyer has advised them that the likelihood of this claim succeeding is nil, and has offered to defend them at no charge. The Dejongs have already paid the claimant $100 for replacement of the missing trousers.
3. Dejong was sued for wrongful dismissal by a former employee. The employee is claiming $2,000 in lost wages. Dejong's lawyer has advised them that the claim, if taken to trial, is likely to be upheld.
4. In early December, some drycleaning fluid spilled and damaged equipment valued at $5,600. Dejong replaced the equipment, which is insured, and expects their insurance policy will reimburse at least $5,000 of the cost and possibly the entire amount. However the exact amount covered by insurance has not yet been determined.
Instructions
For each of the four situations above, evaluate the likelihood and measurability of any losses that Dejong may face. Indicate if any liability should be recorded or disclosed in Dejong's December 31, 2014 financial statements.

Question

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The Answer of Dejong's Drycleaning had the following events occur during December, 2014: Dejong is reporting under ASPE.
1. Dejong signed a $40,000 loan guarantee on behalf of Dejong Junior's. At December 31, Junior's had drawn $10,000 of loan advances. Junior's has sufficient assets to cover its liabilities.
2. Dejong was sued by an irate customer who said the trousers that Dejong had returned to him belonged to someone else. The customer is claiming $10,000,000 in damages for distress because he mistakenly wore the ill-fitting trousers to work and suffered discomfort and embarrassment as a result. Dejong's lawyer has advised them that the likelihood of this claim succeeding is nil, and has offered to defend them at no charge. The Dejongs have already paid the claimant $100 for replacement of the missing trousers.
3. Dejong was sued for wrongful dismissal by a former employee. The employee is claiming $2,000 in lost wages. Dejong's lawyer has advised them that the claim, if taken to trial, is likely to be upheld.
4. In early December, some drycleaning fluid spilled and damaged equipment valued at $5,600. Dejong replaced the equipment, which is insured, and expects their insurance policy will reimburse at least $5,000 of the cost and possibly the entire amount. However the exact amount covered by insurance has not yet been determined.
Instructions
For each of the four situations above, evaluate the likelihood and measurability of any losses that Dejong may face. Indicate if any liability should be recorded or disclosed in Dejong's December 31, 2014 financial statements.

Dejong's Drycleaning Had the Following Events Occur During December, 2014