78. During year 2, a former employee of Dane Co. began a suit
against Dane for wrongful termination in November year 1. After
considering all of the facts, Dane’s legal counsel believes that the
former employee will prevail and will probably receive damages of
between $1,000,000 and $1,500,000, with $1,300,000 being the most
likely amount. Dane’s financial statements for the year ended
December 31, year 1, will not be issued until February year 2. In its
December 31, year 1 balance sheet, what amount should Dane report
as a liability with respect to the suit?
79. Fulton Cereal Company inaugurated a new sales promotional
program. For every 10 cereal box tops returned to the company,
customers receive an attractive prize. Fulton estimates that only 30%
of the cereal box tops reaching the consumer market will be
redeemed. Additional information is as follows:
80. At the end of its year, Fulton recognized a liability equal to the
estimated cost of potential prizes outstanding. What is the amount of
this estimated liability?
81. Baker Co. sells consumer products that are packaged in boxes.
Baker offered an unbreakable glass in exchange for two box tops and
$1 as a promotion during the current year. The cost of the glass was
$2.00. Baker estimated at the end of the year that it would be probable
that 50% of the box tops will be redeemed. Baker sold 100,000 boxes
of the product during the current year and 40,000 box tops were
redeemed during the year for the glasses. What amount should Baker
accrue as an estimated liability at the end of the current year, related
to the redemption of box tops?
82. An estimated loss from a loss contingency that is probable and for
which the amount of the loss can be reasonably estimated should
83. Finch Co. reported a total asset retirement obligation of $257,000
in last year’s financial statements. This year, Finch acquired assets
subject to unconditional retirement obligations measured at