Question

Pacific Cruise Lines is a defendant in litigation involving a swimming accident on one of its three cruise ships.

Required:
1. The likelihood of a payment occurring is probable, and the estimated amount is $1.11 million.
2. The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $0.91 to $1.11 million.
3. The likelihood of a payment occurring is reasonably possible, and the estimated amount is $1.11 million.
4. The likelihood of a payment occurring is remote, while the estimated potential amount is $1.11 million.
Record the necessary entry for the scenarios given above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions, (i.e. 5.5 should be entered as 5,500,000).)

Answer 1

Answer: See explanation

Step-by-step explanation:

The necessary journal entry with regards to the scenarios given above will be:

1. Debit Loss $1,110,000

Credit Contingent liability $1,110,00

2. Debit Loss $910,000

Credit Contingent Liability $910,000

3. No journal entry

4. No journal entry

Note that there won't be a journal entry for (3) and (4) since the likelihood of a payment occurring is reasonably possible, and remote.