Alford Entity (AE) has a September 30 year end. On December 15, 20X7, AE's financial statements were authorized for issue. On December 8, 20X7, a third-party settled a lawsuit for unpaid royalties owed to AE by paying AE $450,000. AE instigated the lawsuit in 20X6 but the third-party disputed the case until December 1, 20X7. A profit-sharing and bonus plan requires AE to pay a specified proportion of its profit for the year to employees who serve throughout the year. How should AE accounting for this event?

Question

Quizplus · Accepted Answer

The Answer of Alford Entity (AE) has a September 30 year end. On December 15, 20X7, AE's financial statements were authorized for issue. On December 8, 20X7, a third-party settled a lawsuit for unpaid royalties owed to AE by paying AE $450,000. AE instigated the lawsuit in 20X6 but the third-party disputed the case until December 1, 20X7. A profit-sharing and bonus plan requires AE to pay a specified proportion of its profit for the year to employees who serve throughout the year. How should AE accounting for this event?

Alford Entity (AE) Has a September 30 Year End