Discuss the proper accounting treatment

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Question - Below are three independent situations.

a. In August, 2018 a worker was injured in the factory in an accident partially 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.

b. A suit for breach of contract seeking damages of $2,400,000 was filed by an author against Greer Co. on October 4, 2018. 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.

c. Quinn is involved in a pending court case against Peete. Peete's lawyers believe it is probable that Quinn will be awarded damages of $1,000,000.

Required - Discuss the proper accounting treatment, including any required disclosures, for each situation. Give the rationale for your answers. Use good grammatical form, narrative, essay style.

Reference no: EM132228873

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