Question

After the end of the 2022 fiscal year but before financial statements were issued, Palladin Company learned that an arbitrator had made a $15 million judgment in a litigation case against it. The claim had been made in 2021 for alleged defects of products sold in 2020. Prior to learning of the judgment, Palladin had not accrued any litigation loss, and does not plan to appeal. For the 2022 fiscal year, Palladin should: Multiple Choice Disclose the potential for a judgment in the notes, but not indicate the amount, since the judgment was made after fiscal year end. Disclose in the notes that a $15 million judgment was made after fiscal year end. Accrue a $15 million liability and explain it in a note to the financial statements. Do nothing relative to the contingency.

Answer 1

Answer:

The Correct Answer is "Accrue a $15 million liability and define it in a note to the financial report"

Explanation:

Collect a $15 million risk and clarify it in a note to the budget reports.  

Since according to the bookkeeping standard of conservatism or show of conservatism, we ought to foresee and represent all the conceivable losses,but not benefits. Since the case have been made in 2021 we should accept it as a future conceivable misfortune and ought to be appeared in our records.