Reference no: EM132560398

Question - Purple Corp. has been sued for the following alleged infringement of law; a) Unauthorized use of a trademark, the claim is $ 10 million. b) Non-payment of the end of service severance pay to 5,000 employees who were terminated without Purple Corp. giving any legitimate reason to them. 2 Purple Corp.'s Legal Counsel's views regarding these litigations were;

a) The changes of the trademark law suit to prepare any reimbursement is remote.

b) For the lawsuit of employees, it is probable that the fired employees will gain a payment which is reasonably estimated between $ 300,000 and $ 1,600,000. No amount within this range is a better estimate considering the previous case results.

Required - Taking in to account given info, present relevant accounting approach that should be followed and if necessary present relevant journal entries and disclosure requirements.