Linden Corporation is a defendant in a lawsuit where the plaintiff is seeking $1,000,000 in
damages. The company had terminated the plaintiff, George Russell, from his position with
Linden after Russell allegedly sold specifications for one of Linden’s new products to a
competitor. Linden’s attorney believes that it is quite possible Linden will lose the case and
that, if so, damages could range from $100,000 to $200,000.
Regardless of the outcome of the case, Linden’s accountants estimate the company will
incur an additional $5,000 in unemployment costs because of Russell’s termination. The amount that Linden should accrue because of the contingency in this situation is