Pine Systems revenues for 2018 totaled $27.1 million. As with most companies, Pine is a defendant in
Question:
Pine Systems’ revenues for 2018 totaled $27.1 million. As with most companies, Pine is a defendant in lawsuits related to its products. Note 14 of the Pine annual report for 2018 reported the following:
14. Contingencies
The company is involved in various legal proceedings.... It is the Company’s policy to accrue for amounts related to these legal matters if it is probable that a liability has been incurred and an amount is reasonably estimable.
Requirements
1. Suppose Pine’s lawyers believe that a significant legal judgment against the company is reasonably possible. How should Pine report this situation in its financial statements?
2. Suppose Pine’s lawyers believe it is probable that a $2.1 million judgment will be rendered against the company. In general terms, how would this situation be reported in Pine’s financial statements (using U.S. GAAP)?
Financial StatementsFinancial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Step by Step Answer:
Req 1 Pine Security Systems should report this situation in a note to the financial stateme...View the full answer
Financial Accounting
ISBN: 978-0134725987
12th edition
Authors: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
