Question

During the year, a $1,000,000 lawsuit was filed against a U.S. company for unsafe working conditions. Management and the attorneys feel that it is not likely that the company will lose the case. The plaintiff who filed the lawsuit has offered to settle for $600,000. Management estimates that lawsuits for unsafe working conditions are generally settled for $300,000. What amount of contingent liability would be recorded for this lawsuit on the company's current balance she

Answer 1

Answer:

The Contingent liability to be recorded for this lawsuit on the current balance sheet is $0.

Explanation:

A Contingent liability is recorded when the chances are probable and the amount can be reasonably estimated.

As in the given case it is not probable that the company will lose the case, no Contingent liability to be recorded.

Therefore, The Contingent liability to be recorded for this lawsuit on the current balance sheet is $0.