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What would be the adjusting entry for the case

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Reference no: EM132563330

Company A is in the middle of a court case with Company Z because Company A refused to accept a batch of goods delivered to it in January 2017 due to its misspecification. Consequently, Company Z is suing Company A in August 2017 and asking for a compensation of $5,000,000 for breaking their trade contract. At the end of December 2017, the lawyers that represent Company A gives a 50-50 percent chance to win.

For Company A:

Question a) What would be the adjusting entry for this case?

Question b) Is it a provision or contingent liability?

Reference no: EM132563330

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