Question

Fernandez Motors, a motorcycle manufacturer, had the following contingencies.
a. Fernandez estimates that it is reasonably possible but not likely that it will lose a current lawsuit. Fernandez’s attorneys estimate the potential loss will be $3,200,000.
b. Fernandez received notice that it was being sued. Fernandez considers this lawsuit to be frivolous.
c. Fernandez is currently the defendant in a lawsuit. Fernandez believes it is likely that it will lose the lawsuit and estimates the damages to be paid will be $60,000.
Determine the appropriate accounting treatment for each of the situations Fernandez is facing.


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  • CreatedJune 15, 2015
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