Loss Contingency
Response to the following problem:
On December 4, 2010, Dan Johnson, delivery truck driver for Farmers Products, Inc., ran a stop sign and collided with another vehicle. On January 8, 2011 the driver of the other vehicle filed suit against Farmers Products for damages to the vehicle. Estimated damages to this vehicle were $6,500. The dairy issued its 2010 financial statements on March 3, 2011.
Required
1. Prepare the disclosures and/or journal entries Farmers Products should make in preparing its December 31, 2010 financial statements.
2. If Farmers Products used IFRS, how would it refer to contingencies?