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What amount should be reported as gain from lawsuit

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Problem - ABC Company provided the following selected transactions related to contingencies. The fiscal year ends on December 31, 2018. Financial statements are Issued on April 1, 2019 In December, 2018, Western became aware of an engineering flaw in a product that poses a potential risk of injury. As a result, a product recall appears Inevitable. This move would likely cost the entity P4,000,000.

In November, 2018, the City of Manila filed suit against Western asking civil penalties and injuctive relief for violations of clean water laws. Western reached a settlement with the city government to pay P1,500,000 in penalties on February 15, 2019, Western is the plaintiff in a P4,200,000 lawsuit filed against a customer for costs and lost profit from contract rejected in 2018. The lawsuit is in final appeal and attorney advised that it is virtually certain that Westem will be awarded P3,000,000.

Required -

1. What is the accrued liability on December 31, 2018?

2. What amount should be reported as gain from lawsuit in 2018?

Reference no: EM132892418

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