Question

1. ) For each of the following, determine what must be disclosed in the footnotes if anything and what liability must be accrued if any.
   1. Tracey is being sued for patent infringement. Their attorney gives them a 50-50 chance of winning the suit.
   2. Traclyn is being investigated by the Interstate Commerce Commission for overcharging for the hauling of freight on their railroad. The ICC suit alleges $650,000 of overcharges, the amount of the suit. Traclyn’s attorney believes the suit has merit but they could settle for $300,000.
   3. Trancee is being sued for $195,000 for injuries that an employee incurred in a car accident while on company business. Trancee’s attorney believes they are at fault but cannot estimate the amount of the settlement.

disclose	accrue
a.
b.
c.

Answer 1

a) contingent laibity so only foot note is required as chances of losing is less than 51%

b) provision is requried ie liablity is accrued and to be recorded in books as the amount of liablity is certain

c) as amount is uncertain it is not possible to make a provison ie it would be treated as contingent liabity and only footnote is required

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