Case Summary: Best Value Hardware (BVH), Inc., a public company, is preparing their balance sheet, and income statement for the calendar year-ended December 31, 2016 based on U.S. GAAP and also based on IFRS. BVHs accountant has already recorded most of the entries at year end on the trial balance but needs your assistance in accounting for the following transactions and preparing the appropriate adjusting journal entries.

Loss Contingency:

12/31/16 Best Value Hardware is being sued by an employee who slipped on spilled milk and broke his back. BVHs lawyers expect to lose the lawsuit and estimate the loss to be between $250,000 and $500,000 with no one outcome being assessed as more likely than the other.

Gain Contingency:

12/31/16 Best Value Hardware had a delivery truck drive through the side of one of their stores causing major damages. The delivery truck is owned by an independent party and Best Value Hardware is suing the trucking company for the $2,000,000 in damages. BVHs lawyers are virtually certain they will win the lawsuit and receive the full amount of damages.

1. Discuss whether or not Best Value Hardware recognizes a contingent liability or Gain under U.S. GAAP and IFRS. If a contingency is recognized, determine how much.

Discuss GAAP:

Discuss IFRS:

2. Record necessary adjusting journal entries in their own adjusting journal entry for 12/31/16.

Journal Entries
Transaction:				Debit	Credit
		Note: