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.

---

Definitions:

Gambling

The wagering of money or something of value on an event with an uncertain outcome, often with the primary intent of winning additional money or material goods.

Alcohol Use

The consumption of beverages containing ethanol, which can vary from infrequent drinking to the frequent and intense consumption that characterizes abuse.

Physical Well-Being

The health and fitness of the body, including factors such as nutrition, exercise, and absence of disease.

Subjective Well-Being

An individual's self-evaluated happiness or satisfaction with life, incorporating emotional reactions and cognitive judgments.