Respuesta :
Answer and Explanation:
According to the scenario, the journal entries are of the given data are as follow:-
Journal Entry
1. Loss A/c Dr. $1,300,000
To Contingent liability A/c $1,300,000
(Being the likelihood of a payment occurring is probable is recorded)
For recording this we debited the loss and credited the contingent liability as it increased the loss and liability
2. Loss A/c Dr. $1,100,000
To Contingent liability A/c $1,100,000
(Being the likelihood of a payment occurring is probable is recorded)
For recording this we debited the loss and credited the contingent liability as it increased the loss and liability
3. The likelihood of payment occurring is reasonably possible instead of probable, so we don’t have a need to record this entry. But we describe this in financial statements in the foot note
No Journal Entry Needed
4. The likelihood of payment occurring is remote so disclosure is not needed.
No Journal Entry Needed
Assuming that the contingency loss is "possible" and can be reasonably estimated, then journal entries should be recorded in order to collect the debt.
What is contingent liability?
It is a liability the occurrence of which may or may not be possible. The journal entries passed in this case, is by debiting the necessary event and by crediting the contingent liability.
As per the given information, the journal entries are of the given data are as follows:-
1. Loss A/c Dr. $1,300,000
To Contingent liability A/c $1,300,000
(Being the likelihood of a payment occurring is possible is recorded)
2. Loss A/c Dr. $1,100,000
To Contingent liability A/c $1,100,000
(Being the likelihood of a payment occurring is possible is recorded)
3. The likelihood of payment occurring is reasonably possible instead of probable, so we don’t have a need to record this entry.
We write this in the financial statements as a footnote.
No Journal Entry.
4. The likelihood of payment occurring is not likely to happen at all so disclosure is not needed.
No Journal Entry.
Hence, The journal entry in terms of contingent liability will be debiting legal costs and credit to record legal liability.
Refer to this link to learn more about contingent liability:
https://brainly.com/question/7041428
