The correct answers are:
Part 1
a. Disclosure is required
b. Disclosure and accrual both are appropriate
c. Disclosure is required
d. Disclosure and accrual both are not needed
Part 2
a. No journal entry is needed
b. Journal entry to be booked will be:
c.No journal entry is needed
d.No journal entry is needed
Workings
a) Since the liability cannot be reasobaly estimated, it will be appropriate to not accrue the same but disclose the information in the notes to accounts.
b) Since the liability is certain and can be estimated, the company should accrue the liabillity in its financial statements.
c) Contingent gains are not accounted for in financial statements.
d) The liability is possible but since the same has not been filed, the management is not required to disclose the same in their financial statements
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5 Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below....
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2021 financial statements are issued on March 15, 2022. a. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2022, judgment was rendered against Eastern in the amount of $121 million plus interest, a total of $136 million. Eastern plans to appeal the judgment and is unable to predict its...
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern’s fiscal year ends December 31, and the 2021 financial statements are issued on March 15, 2022. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2022, judgment was rendered against Eastern in the amount of $123 million plus interest, a total of $138 million. Eastern plans to appeal the judgment and is unable to predict its outcome...
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2021 financial statements are issued on March 15, 2022. a. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2022, judgment was rendered against Eastern in the amount of $111 million plus interest, a total of $126 million. Eastern plans to appeal the judgment and is unable to predict its...
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2021 financial statements are issued on March 15, 2022. a. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2022, judgment was rendered against Eastern in the amount of $112 million plus interest, a total of $127 million. Eastern plans to appeal the judgment and is unable to predict its...
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2021 financial statements are issued on March 15, 2022 a. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2022, judgment was rendered against Eastern in the amount of $117 million plus interest, a total of $132 million Eastern plans to appeal the judgment and is unable to predict its...
5 Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2018 financial statements are issued on March 15, 2019. a. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2019, judgment was rendered against Eastern in the amount of $117 million plus interest, a total of $132 million. Eastern plans to appeal the judgment and is unable to predict...
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern’s fiscal year ends December 31, and the 2018 financial statements are issued on March 15, 2019. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2019, judgment was rendered against Eastern in the amount of $110 million plus interest, a total of $125 million. Eastern plans to appeal the judgment and is unable to predict its outcome...
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