Financial Accounting

HOMEWORK

Problem 8-8B Record contingencies (L08-5) Authors Academic Press faces three potential contingency situations, described below. Authors' fiscal year ends December 31 2018 1. In August 2018, a worker was injured in an accident, partially as a result of his own negligence. The worker has sued the company for $1.2 million. Legal counsel believes it is reasonably possible that the outcome of the suit will be unfavorable, and that the settlement would cost the company from $300,000 to $600,000. 2. A suit for breach of contract seeking damages of $3 million was filed by an author on October 4, 2018. Legal counsel believes an unfavorable outcome is probable. A reasonable estimate of the award to the plaintiff is between $1.5 million and $2.25 million. No amount within this range is a better estimate of potential damages than any other amount. 3. Authors is the plaintiff in a pending court case. Its lawyers believe it is probable that Authors will be awarded damages of $3 million. Required: Determine the appropriate means of reporting each situation for the year ended December 31, 2018, and record any necessary entries. (If no entry is required for a transaction event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions (i.e. 5 should be entered as 5,000,000).) View transaction list Journal entry worksheet 2 Record the contingent liability if needed. Note: Enter debits before credits. Transaction General Journal Debit Credit Advertising expense