Pending Lawsuit at the Beginning of the Year 1. Product liability lawsuit related to Yeswaya, a pharmaceutical drug, in which claimants seek substantial damages. Merlough 's attorneys assess the likelihood of losing the lawsuit as reasonably possible at 65 %. At the beginning of the year, the estimated loss ranged from $515,000 to $1,525,000. At the end of the year, the attorney's assessment of the loss increased to a range between $765,000 and $2,025,000. Explain the accounting for the first lawsuit by answering the questions in the table below.

a) explain how each of the lawsuits is accounted for under US GAAP

b)prepare any journal entry required at the end of the year

Does a contingency exist (yes or no)?

Type of contingency (gain contengency/ lost contingency/ no contengency exist)

Likelihood of occurance .( Probable/reasonably possible/remote/not applicable)

Record (accrue)? (Yes / No)

Footenote disclosure required? (Yes / No)