The ink-Jel printng dvisian of Environmental Printing has grown tremendously in
ID: 2509252 • Letter: T
Question
The ink-Jel printng dvisian of Environmental Printing has grown tremendously in recent years Assume the folowing transactions related to the ink-jet dvisian occur during the year ended December 31, 2018. 1. Environmental Printing is being sued for $10.4 milion by Addamax Plantft aleges that the detendants formed an unlawtul joint ventute and drove it out of business. The case is expecled to go to trial later this year. The likelhood of payment is reasonably possible 2. Eironmental Printing is the plaimmft in an $8.4 million lawsult fied agarst a competitor in the high-end color-printer market Evironmental Printing expects so win the case and be awarded between $5 9 3. Eminometa Printing recently be me aware o' a desi ta none of RS nk et printers. A pr duct recall appears robable Such an a ton woud ikey cost the company between S4400 0 and S84 000 Required: Record any amounts as a result of each of these contingencies. f o entry is required for a transactionievent select "No journal entry required" in the first account field. Enter your answer in dollars, not in millions lie, $5.5 million should be entered as 5,500,000). ew transaction list Journal entry worksheet Record the contingent liability If needed. Nte: Ente s before credts Mew general journalExplanation / Answer
1) Record any amounts as a result of each of these contingencies
Debit
Credit
1
No journal entry required
2
No journal entry required
3
Loss
440,000
Contingent liability
440,000
Explanation
1. The likelihood of loss reasonably possible instead of being probable thus no journal entry is required. However full disclosure of contingent liability has to be made in the financial notes
2. Until the gain is certain contingent liability is not recorded, thus no journal entry is required. However will disclose in the financial notes
3. Environmental printing will record a loss and a liability for the minimum amount of 440,000
Debit
Credit
1
No journal entry required
2
No journal entry required
3
Loss
440,000
Contingent liability
440,000
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