Scorcese Inc. is involved in a lawsuit at December 31, 2014. Prepare the Decembe

Question

Scorcese Inc. is involved in a lawsuit at December 31, 2014. Prepare the December 31 entry assuming it is probable that Scoreese will be liable for $918,800 as a result of this suit. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Prepare the December 31 entry, if any, assuming it is not probable that Scoreese will be liable for any payment as a result of this suit. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Explanation / Answer

1.

Journal entry assuming it is probable that Scorcese will be liable for $918,800 as a result of this suit.

Dr Lawsuit loss         $918,800

      Cr Lawsuit liability               $918,800

2.

No entry is necessary. The loss is not accrued because it is not probable that a liability has been incurred at12/31/14

Dr No Entry                   0

            Cr No Entry                   0

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