P9-9 Making Decisions about Contingent Liabilities LO9-4 For each of the following situations, select whether the company should (a) report a liability on the balance sheet, (b) disclose a contingent liability in the footnotes, or (c) not report the situation. Situation Decision An automobile company introduces a new car. Past experience demonstrates that lawsuits will be filed as soon as the new model is involved in any accidents. The company can be certain that at least one jury will award damages to people injured in an accident, but it is unable to estimate the amount of any payout A research scientist determines that the company's best-selling product may infringe on another 12.| company's patent. If the other company discovers the infringement and files suit, which is unlikely, your (b) company could lose millions. As part of land development for a new housing project, your company has polluted a natural lake. Under state law, you must clean up the lake once you complete development. The development project will 3. lake. 4Your company has just been notified that it is being sued by a customer. The probability of the customer winning is deemed to be probable, but the amount of any loss cannot be reliably estimated. A key customer is unhappy with the quality of a major construction project. The company believes that next year. 5|the customer is being unreasonable but, to maintain goodwill, has decided to do $250,000 in repairs P9-9 Making Decisions about Contingent Liabilities LO9-4 For each of the following situations, select whether the company should (a) report a liability on the balance sheet, (b) disclose a contingent liability in the footnotes, or (c) not report the situation. Situation Decision An automobile company introduces a new car. Past experience demonstrates that lawsuits will be filed as soon as the new model is involved in any accidents. The company can be certain that at least one jury will award damages to people injured in an accident, but it is unable to estimate the amount of any payout A research scientist determines that the company's best-selling product may infringe on another 12.| company's patent. If the other company discovers the infringement and files suit, which is unlikely, your (b) company could lose millions. As part of land development for a new housing project, your company has polluted a natural lake. Under state law, you must clean up the lake once you complete development. The development project will 3. lake. 4Your company has just been notified that it is being sued by a customer. The probability of the customer winning is deemed to be probable, but the amount of any loss cannot be reliably estimated. A key customer is unhappy with the quality of a major construction project. The company believes that next year. 5|the customer is being unreasonable but, to maintain goodwill, has decided to do $250,000 in repairs
