Reference no: EM132676901

Question - Vira manufactures camouflage apparel for paintball enthusiasts. In the normal course of business, the company encounters various situations giving rise to contingencies.

Required - Evaluate the following situations and an explanation of the appropriate accounting considerations for each. If a journal entry is required then an appropriate entry.

1. The company is subject to several lawsuits by plaintiffs. These claims assert that the camouflage is so effective that opposing paint ballers come into too close of a range, and are therefore hurt by high-velocity, close-up shots. The company's attorney views the likelihood of any adverse judgment as highly remote. Further, the company generally has seen increased sales because of publicity associated with these claims.

2. The company manufactures a face shield that has been prone to crack. As a result, several serious injuries have been reported. The company is generally willing to settle each documented claim for $20,000. Currently, it is estimate that 45 such claims will be submitted and settled.

3. The company has been notified by a competitor that one of Vira camouflage designs violates a copyright held by the competitor. The competitor is asking for a $250,000 paid up license for the use of the design. Vira disagrees, but believes that it is possible the competitor will file and win on a copyright infringement action.

4. Subsequent to year end (but before issuing financial statements), an employee was seriously injured by a fabric cutting machine. The company believes the claim is probable of a large financial settlement with the employee for $500,000.