On December 4, 2016, Dan Johnson, delivery truck driver for Farmers Products Inc., ran a stop sign and collided with another vehicle. On January 8, 2017, the driver of the other vehicle filed suit against Farmers Products for damages to the vehicle. Estimated damages to this vehicle were between $6,000 and $10,000 with no amount within the range more likely than any other amount. Farmers Products issued its 2016 financial statements on March 3, 2017.

Required:

1.

Prepare the disclosures and/or journal entries Farmers Products should make in preparing its December 31, 2016, financial statements.

2.

If Farmers Products used IFRS, how would the disclosures and/or journal entries differ from those under U.S. GAAP?

CHART OF ACCOUNTS

Farmers Products Inc.

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
245	Estimated Liability from Lawsuit
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
562	Loss from Litigation
910	Income Tax Expense