Washington County Airport (WCA) faces three potential contingency situations, described below. Their fiscal year ends December 31, 2015.
Required:Determine the appropriate means of reporting each situation for the year ended December 31, 2015 and record any necessary entries. Explain your reasoning.
1. WCA is suing a national airline. WCA’s lawyers confirm that it is probable WCA will be awarded damages of $500,000 in the case.
2. In June, 2015 a worker was injured in an accident and has sued the company for $200,000. Legal counsel believes it is reasonably possible, but not probable, that the outcome of the suit will be unfavorable, and that the settlement would cost the company from $100,000 to $200,000.
3. A suit for $1.5 million was filed by an airline on November 3, 2015. Legal counsel believes an unfavorable outcome is probable. A reasonable estimate of the award payment to the airline is between $500,000 and $1 million. No amount within this range is a better estimate of potential damages than any other amount.