Rugh Company has been sued by two customers who claim to have been injured by products Rugh sold. The two lawsuits are unrelated to each other. For lawsuit #1, Rugh expects to lose the suit, and its attorney estimates that the amount of the damages awarded to the customer will be $500,000. For lawsuit #2, Rugh believes that loss of the suit is possible but not probable. The attorney thinks the amount of the damages may be $15,000.
Required:
Describe the correct accounting treatment for lawsuit #1 and lawsuit #2.

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The Answer of Rugh Company has been sued by two customers who claim to have been injured by products Rugh sold. The two lawsuits are unrelated to each other. For lawsuit #1, Rugh expects to lose the suit, and its attorney estimates that the amount of the damages awarded to the customer will be $500,000. For lawsuit #2, Rugh believes that loss of the suit is possible but not probable. The attorney thinks the amount of the damages may be $15,000.
Required:
Describe the correct accounting treatment for lawsuit #1 and lawsuit #2.

Rugh Company Has Been Sued by Two Customers Who Claim