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Sheridan Shoes Foot Inc. is involved in litigation regarding a faulty product sold in a prior...

Sheridan Shoes Foot Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 45% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be $808000. What is the required journal entry as a result of this litigation?

Debit Litigation Expense for $808000 and credit Litigation liability for $808000.
No journal entry is required.
Debit Litigation Expense for $363600 and credit Litigation Liability for $363600.
Debit Litigation Expense for $444400 and credit Litigation Liability for $444400.

Crane Company, which has a taxable payroll of $785000, is subject to FUTA tax of 6.2% that includes a state contribution rate of 5.4%. However, because of stable employment experience, the company’s state rate has been reduced to 2%. What is the total amount of federal and state unemployment tax for Crane Company?

$64370
$91845
$21980
$31400
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Homework Answers

Answer #2

1)

Answer -

B) No journal entry is required.

As the possibility of outcome of litigation on outgoing of economic resources of entity in the future is not certain and the chance of gaining is mostly certain no need for any adjustment entry.

2).

Answer - C ($21980)

total amount of federal and state unemployment tax = FUTA TAX + SUTA TAX

=($785,000*(6.2%-5.4%))+($785,000*2%)

=$62800+$15700

=$21980

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answered by: anonymous
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