Wanchez Company is a defendant in a lawsuit resulting from injuries sustained by a cus- tomer. During 2000, the customer filed suit against the company for $700,000; the com- pany’s lawyers feel that the customer is at least partially at fault. The suit is expected to be “settled” in 2001.

Required: For each of the following alternatives, show how the company would report or disclose the preceding information in its 2000 annual report. (1) The company’s lawyers think that the lawsuit will probably be settled for between $50,000 and $100,000, with $80,000 being the most likely amount. (2) The company’s lawyers think that it is reasonably possible the customer will win the lawsuit. If so, the amount of the settlement will likely be somewhere between $50,000 and $100,000.

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