Located in Easton, Pennsylvania, Bethlehem Corporation was established in 1856. Today it offers contract services for industrial products, rebuilding and remanufacturing industrial and military equipment per customer specifications and designs. The company also manufactures and sells a line of equipment used in the chemical, environmental, and food industries.

Bethlehem Corporation has a net loss for 1994 of \(\$ 239,251\). One reason for the loss is that Bethlehem reported a loss (and a liability) for expenses and costs associated with certain legal proceedings against Bethlehem. They have not yet lost the case, but they are anticipating losing at least some money.

\section*{Instructions}

(a) Do you think that a loss such as this is relevant to users of Bethlehem's financial statements?

(b) How reliable do you think the estimate of the loss is? What information should the company use to estimate the loss?

(c) Bethlehem reported a loss and a liability related to this lawsuit. Where in its financial statements would you expect to find these two amounts-that is, in what part of the income statement would the loss be presented (assuming a multiple-step income statement) and in what part of the balance sheet would the liability be presented?