Roden Security Systems revenues for 2010 totaled $6.3 million. As with most companies, Roden is a defendant

Question:

Roden Security Systems revenues for 2010 totaled $6.3 million. As with most companies, Roden is a defendant in lawsuits related to its products. Note 14 of the Roden Annual Report for 2010 reported:

Requirements
1. Suppose Roden’s lawyers believe that a significant legal judgment against the company is reasonably possible. How should Roden report this situation in its financial statements?
2. Suppose Roden’s lawyers believe it is probable that a $1.5 million judgment will be rendered against the company. Report this situation in Roden’s financial statements.
Journalize any entry requirements by GAAP. Explanations are not required.