1a. PA Company is involved in a lawsuit brought by former employees. The employees are suing...

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1a. PA Company is involved in a lawsuit brought by formeremployees. The employees are suing for a recovery of $350,000 forinjury at work. The legal advisor is quite pessimistic about thelawsuit and believes that it is probable (more likely than not)that the company will lose the litigation and pay the full amountof the claim.
Required: Discuss the proper accounting treatment, including anyrequired disclosure, for PA Company regarding the above ongoinglitigation (no journal entry is required).
1b. PA Company sells computers for $1,500 each and gives eachcomputer a two-year assurance-type warranty that requires thecompany to perform periodic maintenance services and to replacedefective parts.
On December 31, 2018, the company sold 700 computers onaccount.
The computers sold have a cost of $1,000 each. The companyadopts a perpetual inventory system.
Based on past experience, the company has estimated that thetotal 2-year warranty costs for each computer are $90.
In 2018, PA Company incurred none warranty costs related to the2018 computer sales.
The fiscal year-end is December 31.
Required: Prepare the journal entries for PA Company on December31, 2018

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1a. PA Company is involved in a lawsuit brought by formeremployees. The employees are suing for a recovery of $350,000 forinjury at work. The legal advisor is quite pessimistic about thelawsuit and believes that it is probable (more likely than not)that the company will lose the litigation and pay the full amountof the claim.Required: Discuss the proper accounting treatment, including anyrequired disclosure, for PA Company regarding the above ongoinglitigation (no journal entry is required).1b. PA Company sells computers for $1,500 each and gives eachcomputer a two-year assurance-type warranty that requires thecompany to perform periodic maintenance services and to replacedefective parts.On December 31, 2018, the company sold 700 computers onaccount.The computers sold have a cost of $1,000 each. The companyadopts a perpetual inventory system.Based on past experience, the company has estimated that thetotal 2-year warranty costs for each computer are $90.In 2018, PA Company incurred none warranty costs related to the2018 computer sales.The fiscal year-end is December 31.Required: Prepare the journal entries for PA Company on December31, 2018