Refer to the Ludeman Security Systems situation in Exercise 11-9. Suppose that Ludeman Security Systems' lawyers advise that a preliminary judgment of $300,000 has been rendered against the company. The company will appeal the decision.

Exercise 11-9

Ludeman Security Systems is a defendant in lawsuits brought against the monitoring service of its installed systems. Damages of $1,000,000 are claimed against Ludeman Security Systems, but the company denies the charges and is vigorously defending itself. In a recent newspaper interview, the president of the company stated that he could not predict the outcome of the lawsuits. Nevertheless, he said management does not believe that any actual liabilities resulting from the lawsuits will significantly affect the company's financial position.

Required

Describe how to report this situation in the Ludeman Security Systems' financial statements. Journalize any entry required under ASPE. Explanations are not required.