Far Out Producers is involved in two product liability lawsuits and a third lawsuit that the company

Question:

Far Out Producers is involved in two product liability lawsuits and a third lawsuit that the company brought against a competitor for patent infringement. At December 31, Year 1, the company’s attorneys informed management of the following:
• It is probable that Far Out will lose one of the product liability lawsuits, although the actual settlement could be as low as $ 800,000 and as high as $ 2,000,000.
• It is possible that the company could lose $ 1,000,000 in the second product liability lawsuit.
• It is probable that Far Out will win $ 500,000 in the patent infringement case. What should Far Out report on its December 31, Year 1 for these contingencies?
a. $ 300,000 contingent liability
b. $ 800,000 contingent liability
c. $ 1,800,000 contingent liability
d. $ 3,000,000 contingent liability
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...