Away Travel filed suit against West Coast Travel seeking damages for copyright violations. Away Travel's legal counsel believes it is probable (but not certain) that Away Travel will win the lawsuit for an estimated amount in the range of $100,000 to $200,000, with all amounts in the range considered equally likely. How should Away Travel report this litigation?
A) As a receivable for $100,000 with disclosure of the range.
B) As a receivable for $150,000 with disclosure of the range.
C) As a receivable for $200,000 with disclosure of the range.
D) As a disclosure only. No receivable is reported.
Answer: D
Away Travel filed suit against West Coast Travel seeking damages for copyright violations. West Coast Travel's legal counsel believes it is reasonably possible that West Coast Travel will settle the lawsuit for an estimated amount in the range of $100,000 to $200,000, with all amounts in the range considered equally likely. How should West Coast Travel report this litigation?
A) As a liability for $100,000 with disclosure of the range.
B) As a liability for $150,000 with disclosure of the range.
C) As a liability for $200,000 with disclosure of the range.
D) As a disclosure only. No liability is reported.
Answer: D
Young Company is involved in a lawsuit. The liability that could arise as a result of this lawsuit should be recorded on the books if the probability of Young owing money as a result of the lawsuit is:
A) Remote and the amount is reasonably estimable.
B) Probable and the amount is reasonably estimable.
C) Reasonably possible and the amount is reasonably estimable.
D) Probable and the amount is not reasonably estimable.
Answer: B
