1.In 2014 heirs of the original creator of copyright that Able company purchased filed a lawsuit claiming they were swindled and the value of the copyright should have been $500,000. The lawsuit is requesting $340,000 in damages and another $100,000 in court costs and attorney fees. Your attorney advises you that the suit has a remote possibility of success and the only cost to Able Company is the $1,000 in fees to prepare evidence and appear in court. Where does this potential liability appear on Able Company's 2013 Balance sheet?
2. Able Company has the following aged receivables report at December 31, 2013:
Current 1-30 days 31-60days 61-90 days
$12,000 $7,000 $2000 $500
Passed experience shows that receivables older than 61 days have a 75% chance of becoming uncollectable. Current receivables are usually 5% uncollectable, 1-30 days 20% uncollectable, and 31-60 days 30% uncollectable.
Able Company's current allowance for uncollectable accounts receivable is $200. Prepare the journal entry needed to adjust the Balance Sheet for the current expected bad debt.