ACC 304 All Assignments ACC 304 All Assignments | Page 227
3) Buchanan Company recently was sued by a competitor for patent
infringement. Attorneys have determined that it is probable that
Buchanan will lose the case and that a reasonable estimate of damages
to be paid by Buchanan is $317,310. In light of this case, Buchanan is
considering establishing a $115,690 self-insurance allowance.
4) Buchanan should record a litigation accrual on the patent case,
since the amount is both estimable and probable. This entry will reduce
income by $317,310 and Buchanan will report a litigation liability of
$317,310. The $115,690 self-insurance allowance has no impact on
income or liabilities.
5) Green Day Hardware Company’s payroll for November 2014 is
summarized below.
Amount Subject to Payroll Taxes
Unemployment Tax
Payroll
Wages Due
Factory
$43,000
Sales
$212,000
36,400
Administrative
Total
Federal
$289,600
State
$43,000
5,300
5,300
41,200
$48,300
$48,300