Prepare the December 31 entry assuming it is probable that Scorcese will be liable for $900,000 as a result of this suit. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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Elisa Roy

21 December, 18:57

Prepare the December 31 entry assuming it is probable that Scorcese will be liable for $900,000 as a result of this suit. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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Chance Ortiz · Answer 1

Debit legal expense/penalties (p/l) $900,000

Credit Provisions (B/s) $900,000

Explanation:

According to IAS 37 Provisions, contingent liabilities and contingent assets, a provision is to be recorded where there is a present obligation as a result of a past event and the outflow of economic benefits to satisfy the obligation is probable.

Hence if it is probable that Scorcese will be liable for $900,000 as a result of this suit, a provision is needed and will be recorded by;

Debit legal expense/penalties (p/l) $900,000

Credit Provisions (B/s) $900,000