Reference no: EM133107729

Question 1 - Fred sued Big Brother Corp. (BBC) for $100,000,000 alleging that the radiation from BBC's power lines in the vicinity of her home caused her irreparable brain damage. BBC's legal counsel considers this to be a nuisance lawsuit with a very low probability of success. Prepare any journal entries that may be required.

Question 2 - The Province of Ontario sued Small Cable Corp. (SCC) for $20,000,000 for the cost of cleaning up SCC's accidental discharge of chemical. SCC acknowledged liability but disputed the amount, believing the actual cleanup costs to be somewhere between $14,000,000 and $16,000,000. SCC's $50,000,000 insurance policy for negligence is subject to a $2,000,000 deductible. Prepare any journal entries that may be required.

Question 3 - Sandy sued it's your Corp. (IYC) for $200,000 for breach of contract. IYC's legal counsel is very concerned that the jury hearing the trial will not be able to understand the very complex issues being discussed. For this reason, counsel believes that IYC has a 40% probability of losing and, if found liable, the jury will award the full amount ($200,000) being sought by the plaintiff. Prepare any journal entries that may be required.

Question 4 - FB Corp. sued Show Inc. for $800,000 for patent infringement. Show Inc.'s legal counsel believes that the plaintiff has a 60% probability of success. Assuming that the plaintiff is successful, counsel believes that there is a 20% probability of a $400,000 award; a 50% probability of a $600,000 award; and a 30% probability of a $700,000 award. Assume that all amounts can be reliably measured. Describe the appropriate accounting treatment for each of the situations above for the defendant in the case (the company that is being sued). Prepare any journal entries that may be required.

Question 5 - In May 20X2, F&M Co. became involved in litigation with one of its Customer Charles who filed a defamation suit. As a result, it is probable that F&M will have to pay $1,300,000. In July 20X2, a competitor commenced a suit against F&M alleging violation of antitrust laws and seeking damages of $2,200,000. F&M denies the allegations, and the likelihood that F&M will have to pay any damages is remote. In September 20X2, The Swift County brought action against F&M for payment of damages for polluting Pigeon Lake. It is possible that the county's suit will be successful, but the amount of damages F&M will have to pay is not reasonably determinable. What amount, if any, should be accrued in 20X2.