Question
5
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Easte
Required: 1. Determine the appropriate means of reporting each situation. 2. Prepare the appropriate journal entries for thes
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Answer #1
a As eastern is unable to predict the outcome, it is a loss contingency disclouser should be made
No journal Entry required
b It is also a loss contingency but the company is able to estimate the loss entry is made
General Journal Debit Credit
Litigation loss 150
Litigation liability 150
c It is a gain contingency. Gains should be recognized only on their realization
No entry
d No disclouser as the competitor has not yet filed any case against the company
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