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Prepare the year-end entries for any amounts that should be

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Prepare the year-end entries for any amounts that should be recorded as a result of the contingency and indicate whether a disclosure note is indicated.

Classical is the plaintiff in a $4 million lawsuit filed against a supplier. The suit is in final appeal and attorneys advise that it is virtually certain that Classical will win the case and be awarded $2.5 million.

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This solution prepares year-end entries.

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Current liabilities:

Estimate for contingent liabilities/pending lawsuit 2,500,000
Contingent liabilities 2,500,000
--

The contingent liability ...

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