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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,

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

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