Leisure Luggage maintains a line of luggage designed for airline travel. Assume the following transactions occur during the year ended December 31, 2015.
Record any amounts as a result of each of these contingencies.
1. In November 2015, Leisure Luggage became aware of a design flaw in one of its lines of luggage. A product recall is probable and is estimated to cost the company between $300,000 and $500,000.
2. Leisure Luggage is the defendant in a patent infringement lawsuit brought by a competitor. It appears reasonably possible Leisure Luggage will lose the case, and potential losses are estimated to be $1.2 million.
3. Credit sales were $12 million for 2015. Although no customer accounts have been shown to be uncollectible, the company estimates that 3% of credit sales will eventually prove uncollectible.
4. Leisure Luggage is the plaintiff in a lawsuit filed against a supplier. The suit is in final appeal, and attorneys advise it is virtually certain that Leisure Luggage will win and be awarded $800,000.