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Grouper Inc. is involved in a lawsuit at December 31, 2020. Prepare the December 31 entry assuming it is probable that Grouper will be liable for $863,600 as a result of this suit. (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.)

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Answer:

Grouper Inc. is involved in a lawsuit at December 31, 2020

It is given that Grouper will be liable for $863,600 as a result of this suit. Therefore, the journal entry for this situation is as follows;

On December 31, 2020

Lawsuit loss  A/c  Dr. $863,600

       To Lawsuit liability               $863,600

(To record the lawsuit loss of the Grouper Inc.)