Question

Compact Electronics is a leading manufacturer of digital camera equipment. Assume the following transactions occur during the year ended December 31, 2015.

Required:
Record any amounts as a result of each of these contingencies.
1. Accounts receivable were $29 million (all credit) at the end of 2015. Although no specific customer accounts have been shown to be uncollectible, the company estimates that 3% of accounts receivable will eventually prove uncollectible.
2. Compact Electronics is the plaintiff in a $5 million lawsuit filed against a supplier. The suit is in final appeal, and attorneys advise it is virtually certain that Compact Electronics will win and be awarded $3.5 million.
3. In November 2015, Compact Electronics became aware of a design flaw in one of its digital camera models. A product recall appears probable and would likely cost the company $600,000.
4. Compact Electronics is the defendant in a patent infringement lawsuit brought by a competitor. It appears reasonably likely Compact Electronics will lose the case, and potential losses are estimated to be in the range of $2.5 to $3.5 million.



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  • CreatedJuly 15, 2014
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