Reference no: EM132769443
Problem - Assume that XYZ, Inc. believed that it was seriously damaged by some poor services that ABC, Inc. had provided it under a service contract and sued ABC, Inc. for damages. As of the end of ABC's fiscal year in which the suit was filed, XYZ, Inc. had won its initial lawsuit and had been awarded $1.5 million in damages. ABC, Inc.'s management has appealed the judgment. However, it does not feel that it will win the appeal. However, it believes that it can reduce the amount of the award to $800,000.
Required -
a) What journal entry and footnote disclosures would ABC, Inc. make, if any, at the end of its fiscal year? Assume that the lawsuit has did not affect the underlying contract for services. Explain your entry and footnote disclosures, or lack thereof. Be sure to include the appropriate abbreviations.
b) Assume that XYZ has the same fiscal year as ABC, Inc. What journal entry and footnote disclosures would XYZ, Inc. make, if any, at 1/31/10? Assume that the lawsuit has did not affect the underlying contract for services. Explain your entry and footnote disclosures, or lack thereof.
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