Analyze the Following Independent Situations

question 17

Essay

Analyze the following independent situations. Required: For each situation, state the likelihood of a future event and state how the contingency will be reported.
A) Company A estimates it will have to pay $85,000 in warranty repairs next year.
B) Company B is being sued by a customer. Company B's attorneys feel that this is a frivolous lawsuit and there is very little chance that the customer will win.
C) Company C co-signed a note payable for Company D. Company D is having serious financial problems and it is reasonably possible that Company C will have to pay the note.
D) Company E is being sued for a patent infringement. Company E's attorney feels that Company E will be found liable for damages caused by the patent infringement. However, the attorney states it is not possible to estimate the amount of the award.

• A) Company A estimates it will have to pay $85,000 in warranty repairs next year.
• B) Company B is being sued by a customer. Company B's attorneys feel that this is a frivolous lawsuit and there is very little chance that the customer will win.
• C) Company C co-signed a note payable for Company D. Company D is having serious financial problems and it is reasonably possible that Company C will have to pay the note.
• D) Company E is being sued for a patent infringement. Company E's attorney feels that Company E will be found liable for damages caused by the patent infringement. However, the attorney states it is not possible to estimate the amount of the award.

---

Definitions:

Notice of Dishonor

A notification that a negotiable instrument, such as a check or promissory note, has been presented for payment and that payment has been refused.

Banking Day

A business day during which financial institutions are open for business with the public, typically excluding weekends and public holidays.

Calendar Days

The consecutive days on a calendar, including all weekdays and weekend days.

Without Recourse

A term indicating that the seller of an asset is not liable to the buyer for any defects or non-performance.