Koll’s Company is preparing its annual financial statements at December 31. During the year, a customer fell while riding on the escalator and has filed a lawsuit for $150,000 because of a claimed back injury. The lawyer employed by the company has carefully assessed all of the implications. If the suit is lost, their attorney’s reasonable estimate is that the $150,000 will be assessed by the court.

Assume that the company decided to accrue a loss of $150,000 during the year based upon their assessment. However, during the next year, the suit was settled for $175,000.

Record the entry for the settlement and show the financial statement impact.

Answer rating: 100% (QA)

The entry for the settlement would be Debit Lawsuit Loss ... View the full answer