Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2021 financial

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2021 financial statements are issued on March 15, 2022. a. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2022, judgment was rendered against Eastern in the amount of $121 million plus interest, a total of $136 million. Eastern plans to appeal the judgment and is unable to predict its outcome though it is not expected to have a material adverse effect on the company. b. In November 2020, the State of Nevada filed suit against Eastern, seeking civil penalties and injunctive relief for violations of environmental laws regulating hazardous waste. On January 12, 2022, Eastern reached a settlement with state authorities. Based upon discussions with legal counsel, the Company feels it is probable that $154 million will be required to cover the cost of violations. Eastern believes that the ultimate settlement of this claim will not have a material adverse effect on the company. c. Eastern is the plaintiff in a $214 million lawsuit filed against United Steel for damages due to lost profits from rejected contracts and for unpaid receivables. The case is in final appeal and legal counsel advises that it is probable that Eastern will prevail and be awarded $150 million. d. At March 15, 2022, Eastern knows a competitor has threatened litigation due to patent infringement. The competitor has not yet filed a lawsuit. Management believes a lawsuit is reasonably possible, and if a lawsuit is filed, management believes damages of up to $47 million are reasonably possible. Required: 1. Determine the appropriate way to report each situation. 2. Prepare the appropriate journal entries for these situations. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate journal entries for these situations. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field. Enter your answers in whole dollars.) View transaction list Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the appropriate way to report each situation. Situation A Situation B Situation C Situation D Required 1 Required 2 > Situation A Situation B Situation C Situation D Accrual & disclosure note Disclosure note only Required 2 > No action required Required 1 Required 2 Prepare the appropriate journal entries for these situations. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.) View transaction list Journal entry worksheet 2 3 4 Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2022, judgment was rendered against Eastern in the amount of $121 million plus interest, a total of $136 million. Eastern plans to appeal the judgment and is unable to predict its outcome though it is not expected to Note: Enter debits before credits. Transaction General Journal D ebit Credit Record entry Clear entry View general journal Required 1 Required 2 Prepare the appropriate journal entries for these situations. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field. Enter your answers in whole dollars.) View transaction list Journal entry worksheet

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Law And Economics Of Patent Damages, Antitrust, And Legal Process

Authors: James Langenfeld, Frank Fagan, Samuel Clark

2nd Edition

1800710259, 9781800710252

More Books

Students also viewed these Accounting questions

Question

Do you agree that unions stifle creativity? Why or why not?

Answered: 1 week ago

Question

6 What is the selection phase?

Answered: 1 week ago