For each independent situation: ∗×
1.A former employee of Melvin Minimarket Inc.sued the company for $900,000,alleging that the company owner sexually harassed her.Melvin's lawyers suggest that the lawsuit has a 30-40% probability of success and that,if successful,the plaintiff will be awarded between $400,000 and $500,000.
2.Leduc Pyrotechnics Ltd.received a $15,000 fee to guarantee the $800,000 bank indebtedness of Kenora Fireworks Inc.The fair value of the guarantee is initially estimated to be $15,000.
3.Montomery Syringes Co.sued a competitor for $800,000,alleging corporate espionage.Montomery's legal counsel believes that the company will be successful and will be awarded somewhere in the range of $650,000 to $800,000.
Describe how the event should be dealt with in the financial statements and explain why.Prepare all required journal entries.