A Suit for Breach of Contract Seeking Damages of $3,000,000

question 3

Multiple Choice

A suit for breach of contract seeking damages of $3,000,000 was filed against Clark Corporation on March 1, 2017. Clark's legal counsel believes that a negative outcome is highly probable. A reasonable estimate of the court's award to the plaintiff is $600,000. Settlement is expected to occur during the latter part of 2017. What accounting is necessary for the year ending June 30, 2017?

• A)Note disclosure only
• B)Accrue a contingent liability of $3,000,000 and provide note disclosure explaining the contingency
• C)Accrue a contingent liability of $600,000 and provide note disclosure explaining the contingency
• D)No disclosure or accrual necessary

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