Prob 4-2

1. Loss from litigation 4,500,000

Litigation liability 4,500,000

2. No entry. The labor dispute is a loss contingency and cannot be accrued unless it is both probable and
reasonably estimable. Costs cannot be adequately predicted. A disclosure note is appropriate.

3. No entry. The lawsuit filed by Accord Company is a loss contingency and cannot be accrued because it
is only reasonably possible that a loss will result. A disclosure note is appropriate.

4. No entry. The environment violation is an unasserted assessment. It must first be probable that an
assessment will be made and cannot be accrued unless it is both probable and reasonably estimable
that the assessment will result in a loss.