Question

please solve ABCD

Exercise 8-13A Determine proper treatment of a contingent liability (LOV-5) Pacific Cruise Lines is a defendant in litigation involving a swimming accident on one of its three cruise ships Required: 1 The likelihood of a payment occurring is probable, and the estimated amount is $110 million 2. The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $0.90 to $110 million 3. The likelihood of a payment occurring is reasonably possible, and the estimated amount is $110 million 4. The likelihood of a payment occurring is remote, while the estimated potential amount is 5110 million Record the necessary entry for the scenarios given above. (If no entry is required for a particular transaction/event, select "No Journal Entry Required in the first account field. Enter your answers in dollars, not in millions. For example, 55.5 million should be entered as 5,500,000.) References View transaction list Journal entry worksheet LA Record the contingent liability, if necessary, if the likelihood of a payment occurring is probable, and the estimated amount is $1.10 million. Note: Enter debits before credits. Transaction General Journal Debit Credit < Prex 4 of 7 Next >

Answer 1

As per ASC 450 two criteria has to met for it to be recognized in the books of accounts

1. it is probable that a liability has been incurred
2. the amount of the loss can be reasonably estimated

Another important point to note is for the transaction 2 that If the loss amount is estimated to be in a range then liability to be recognized for  the minimum amount of the range.

A disclosure is required for Transaction 3 as the occurrence is reasonably possible but not probable, No recognition of liability through journal entry is required.

For the transaction 4 the occurrence is remote so neither disclosure nor journal entry is required

For the transaction 4

Transaction	Account Title and explanation	Debit $	Credit $
1	Loss on law suit	110,000,000
	Law suit liability		110,000,000.00
	To recognize the contingent liability
2	Loss on law suit	90,000,000.00
	Law suit liability		90,000,000.00
	To recognize the contingent liability
3	No entry required
4	No entry required