For Each Independent Situation

question 85

Essay

For each independent situation:
1. A former employee of Melvin Minimarket Inc. sued the company for $900,000,alleging that the company owner sexually harassed her. Melvin's lawyers suggest that the lawsuit has a 30-40% probability of success and that,if successful,the plaintiff will be awarded between $400,000 and $500,000.
2. Leduc Pyrotechnics Ltd. received a $15,000 fee to guarantee the $800,000 bank indebtedness of Kenora Fireworks Inc. The fair value of the guarantee is initially estimated to be $15,000.
3. Montomery Syringes Co. sued a competitor for $800,000,alleging corporate espionage. Montomery's legal counsel believes that the company will be successful and will be awarded somewhere in the range of $650,000 to $800,000.
Requirement:
Describe how the event should be dealt with in the financial statements and explain why. Prepare all required journal entries.

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Definitions:

Chyme

Digested products that leave the stomach through the small intestine and then pass through the ileocecal valve.

Specimen Cup

A small container used for collecting and transporting samples of bodily fluids or tissues for laboratory analysis.

Contaminating

The act of making something impure or unsuitable by contact or addition of a harmful substance.