$($CH$9-$ Q$1)$: Contingent Liabilities $(9$ points total, $3$pts each$)$

Big Lots Company prepares annual financial statements for the year ended December $31,2022.$ Indicate how Big Lots

would disclose or account for each item listed below in the financial statements for the fiscal year of $2022$ under the U$.$S$.$

GAAP. No journal entries are required. You should state your reasoning $($with a specific dollar amount, if any$).$

Big Lots sold $90,000$ electronic products for total sales of $$2,100,000.$ Big Lots expects that $3,500$ products will

need warranty repairs in the next two years and estimates the cost of repairs to be $$68,000.$

In June $2020,$ the State of New York filed a lawsuit against Big Lots, asking civil penalties and injunctive relief for

violations of clean water laws. At December $31,2022,$ based on discussions with legal counsel, Big Lots believes

that it is probable that the company would lose in the lawsuit case. The company's management estimated that the

company has to pay $$450,000$ as the settlement.

As of December $31,2022,$ Big Lots is defending against a lawsuit resulting from a dispute with a customer. Big

Lots' management believes that there is a $50\%$ chance it will lose in court. If it loses, Big Lots estimates that the

damage will be $$330,000.$