French's Fine Foods experienced the following transactions during the year:
1. A customer fell in one of French's stores and is seeking $150,000 in damages. French's attorneys believe that it is remote that the customer will win the lawsuit.
2. Another customer became seriously ill after eating some bad snails purchased from French's. The customer is seeking $200,000 in damages. French's attorneys believe that it is probable that the customer will win the lawsuit and receive the $200,000.
3. A competitor is suing French's for a trademark violation and is seeking $1,500,000 in damages. French's attorneys believe that it is reasonably possible that the competitor may win the lawsuit.
Required: For each of the situations, determine the accounting treatment required. If a journal entry is needed prepare the journal entry.

Question

Quizplus · Accepted Answer

The Answer of French's Fine Foods experienced the following transactions during the year:
1. A customer fell in one of French's stores and is seeking $150,000 in damages. French's attorneys believe that it is remote that the customer will win the lawsuit.
2. Another customer became seriously ill after eating some bad snails purchased from French's. The customer is seeking $200,000 in damages. French's attorneys believe that it is probable that the customer will win the lawsuit and receive the $200,000.
3. A competitor is suing French's for a trademark violation and is seeking $1,500,000 in damages. French's attorneys believe that it is reasonably possible that the competitor may win the lawsuit.
Required: For each of the situations, determine the accounting treatment required. If a journal entry is needed prepare the journal entry.

French's Fine Foods Experienced the Following Transactions During the Year