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Harrington Company was sued by an employee in late 2017. General counsel concluded that there was...

Harrington Company was sued by an employee in late 2017. General counsel concluded that there was an 80 percent probability that the company would lose the lawsuit. The range of possible loss is estimated to be $20,000 to $70,000, with no amount in the range more likely than any other. The lawsuit was settled in 2018, with Harrington making a payment of $60,000.

Assume that a U.S.–based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes.

Required:

  1. Prepare journal entries for this lawsuit for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.

  2. Prepare the entry(ies) that Harrington would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.

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Assume that a u-s- baseal company is issuina secueite to foeciyn nvestots coho equte inanciel statement s Psepayed in Accosdance coith IF RS Ths, adjust mentsto Conveel fsom Us. GAnp to FRS must be made ng oe income taxes Solu & GAAP qs Show be lo Debit C>edit- Date Account tile and Explanajion S20000 31/t2/20l Loss on Loasust -estimated acoant $2000 O 2000 CO 31/2208 A dditional loss on los accountCalance 40000 $Go000 2000 o) cash Zecosdthe cashPu.don set lernent. СТОyndet TFRS as shown below $4600 o To Estimated Iabl fot laosit CStrm 45000 81-12- Eslimaled liabilit fot kosu Addition a loss on laosuu+ qccount $16o0o (balance (60000-450o $6o000 so cas CTo Recosd the cash Paud on setle ment Note: ÚndPE Us-GAAP. İF the-, ange of poss:ble losses ase known and the poss cannot be estimałedl, then the loss to be ッ2 . Únde#1F RS, the sange of possib losses ate knouon and the loss cannot be estimated, then the Joss fo be Secosded is the avasage bf the oF the gven Sange al entsies foe Co nvession Fso Psepase the Joun us GAAP to IFRS as shown belouo: Date Account trle な+1 e und Explanation 3l-12 -20IL Loss on hwsut -es timale d accoun $25000 C 40000 1600 0 $25000 СТО Ąeco sd the diff esence of eshmded oss undee the tow methods $2500 c $25000 To Adition Lto Recosd the closing af adldiHlonal

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