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XYZ Co. operates amusement park and now is being sued for $7,000,000 for an injury caused to a child as a result of alleged negligence while the child was visiting the park in April 2019. The suit was filed in July 2019. PT X's lawyer states that it is probable that XYZ Co. will lose the suit and be found liable for a judgement costing anywhere from $900,000 to $4,100,000. However, the lawyer states that the most probable judgement is $1,500,000.
Problem A. Explain how this transaction should be accounted for at December 31, 2019.
Problem B. Prepare journal entry to record this entry on December 31, 2019.
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