Journal Entry for Contingent Liability: Recognition and Scenarios
Vacuum Inc. should record a debit to warranty expense for $250,000 and a credit to a warranty liability account for $250,000. The journal entry would include a debit to legal expense for $1.25 million and a credit to an accrued liability account for $1.25 million. Pending lawsuits and product warranties are two examples of contingent …
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