arik company is the plaintiff in two lawsuits. the first suit involves a competitor who has made an exact…

arik company is the plaintiff in two lawsuits. the first suit involves a competitor who has made an exact copy of one of ariks products, and arik is suing for patent infringement. the attorneys estimate a $5,000,000 award for arik; however, it is anticipated that the case will be in litigation for 2 to 3 years before final resolution. the second case also involves patent infringement; however, in this instance, the attorneys do not believe arik has a strong case. it is estimated that the company has a 50% chance of winning and the award, if any, would be in the $250,000 to $1,000,000 range. the most appropriate amount to be recorded as a gain contingency is $5,250,000 $0 $5,125,000 $5,000,000

arik company is the plaintiff in two lawsuits. the first suit involves a competitor who has made an exact copy of one of ariks products, and arik is suing for patent infringement. the attorneys estimate a $5,000,000 award for arik; however, it is anticipated that the case will be in litigation for 2 to 3 years before final resolution. the second case also involves patent infringement; however, in this instance, the attorneys do not believe arik has a strong case. it is estimated that the company has a 50% chance of winning and the award, if any, would be in the $250,000 to $1,000,000 range. the most appropriate amount to be recorded as a gain contingency is $5,250,000 $0 $5,125,000 $5,000,000

Answer

Brief Explanations:

Under accounting principles, gain contingencies are not recognized in the financial statements until the gain is realized. Even though there are estimates of potential awards in the lawsuits, they are still contingent events. So, no amount should be recorded as a gain contingency.

Answer:

$0