Pronghorn Company recently was sued by a competitor for pate

Pronghorn Company recently was sued by a competitor for patent infringement. Attorneys have determined that it is probable that Pronghorn will lose the case and that a reasonable estimate of damages to be paid by Pronghorn is $292,700. In light of this case, Pronghorn is considering establishing a $90,800 self-insurance allowance.

What entry, if any, should Pronghorn record to recognize this loss contingency? (If no entry is required, select \"No Entry\" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Solution

General Journal Debit Credit Litigation Expense $292,700 Litigation Liability $292,700