On January 30, 2016, a suit was filed against Frazier Corporationunder the Environmental Protection Act. OnAugust 6, 2017, Frazier Corporation agreed to settle theaction and pay $920,000 in damages to certain currentand former employees. How should this settlement bereported in the 2017 financial statements? Discuss.

On January 30, 2016, a suit was filed against Frazier Corporationunder the Environmental Protection Act. OnAugust 6, 2017, Frazier Corporation agreed to settle theaction and pay $920,000 in damages to certain currentand former employees. How should this settlement bereported in the 2017 financial statements? Discuss.

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter20: Corporations And Parterships

Section: Chapter Questions

Problem 11DQ

See similar textbooks

Similar questions

During 2018, Rosanna Company was sued by a competitor for P5,000,000 for infringement of a patent. Based on the advice of the legal counsel, the entity accrued the sum of P3,000.000 as a provision on December 31, 2018. Subsequently, on March 15, 2019, the Supreme Court decided in favor of the party alleging infringement of the patent and ordered the defendant to pay the aggrieved party a sum of P3,500,000. The financial statements were prepared by management on February 15, 2019 and approved by the board of directors on March 31, 2019. The financial statements were prepared by management on February 15, 2019 and approved by the board of directors on March 31, 2019. What amount should be adjusted on December 31, 2018 in relation to this event?
On January 30, 2019, a suit was filed against Frazier Corporation under the Environmental Protection Act. On August 6, 2020, Frazier Corporation agreed to settle the action and pay $920,000 in damages to certain current and former employees. How should this settlement be reported in the 2020 financial statements? Discuss.
During 2021, Angela Inc. was sued by a competitor for P5,000,000 for infringement of a patent. Based on the advice of the legal counsel, the entity accrued the sum of P3,000,000 as a provision on December 31, 2021. Subsequently on March 15, 2022, the Supreme Court decided in favor of the party alleging infringement of the patent and ordered the defendant to pay the aggrieved party the sum of P3,500,000. The financial statements were prepared by management on February 15, 2022 and approved by the board of directors on March 31, 2022. What amount should be adjusted on December 31, 2022 in relation to this event?A. 1,000,000B. 1,500,000C. 500,000D. 2,000,000
On Feb, 5, 2017, an employee filed a P 2,000,000 lawsuit against Sans Co. for damages suffered when one of Sans' plant exploded on Dec, 29, 2016. The legal counsel believed the entity would probably lose the lawsuit and estimated the loss to be P 500,000. The employee offered to settle the lawsuit out of court for P 900,000 but the entity dis not agree to the settlement. On December 31, 2016, what amount should be reported as liability from lawsuit?
Tyeso Company entered into a lawsuit on December 25, 2020 and recognized on the same date a provision of P2,000,000. On February 28, 2021, when the financial statements for the year ended December 31, 2020 had not yet been authorized for issue, the case was settled and the court decided the final total damages to paid by the entity at P3,000,000. In addition, the Company has a loan payable of P2,000,000 due on June 30, 2021. On January 1, 2021, before the authorization of the issuance of financial statements, the bank agreed to refinance the loan, extending the maturity to June 30, 2023. Also, another loan amounting to P7,000,000 due on December 1, 2021 was obtained by the Company from BDO. TYESO Company has the discretion to refinance or roll over the loan for at least twelve months from December 31, 2021. 1. Compute for the current liability to be presented in the financial position a. P12 million b. P10 million c. P5 million d. P4 million Answer: 2. Compute for…
ROSE Company entered into a lawsuit on December 20, 2021 and recognized on the same date a provision of ₱2,000,000. On February 28, 2022, when the financial statements for the year ended December 31, 2021 had not yet been authorized for issue, the case was settled and the court decided the final total damages to be paid by the entity at ₱3,000,000. In addition, the Company has a loan payable of ₱2,000,000 due on June 30, 2022. On January 1, 2022, before the authorization of the issuance of financial statements, the bank agreed to refinance the loan, extending the maturity to June 30, 2024. Also, another loan amounting to ₱7,000,000 due on December 1, 2022 was obtained by the Company on January 2, 2022 from BPI. ROSE Company has the discretion to refinance or roll over the loan for at least twelve months from December 31, 2022. At what amount should the non-current liability be presented in the statement of financial position? ₱ 2,000,000 ₱…
ROSE Company entered into a lawsuit on December 20, 2021 and recognized on the same date a provision of ₱2,000,000. On February 28, 2022, when the financial statements for the year ended December 31, 2021 had not yet been authorized for issue, the case was settled and the court decided the final total damages to be paid by the entity at ₱3,000,000. In addition, the Company has a loan payable of ₱2,000,000 due on June 30, 2022. On January 1, 2022, before the authorization of the issuance of financial statements, the bank agreed to refinance the loan, extending the maturity to June 30, 2024. Also, another loan amounting to ₱7,000,000 due on December 1, 2022 was obtained by the Company on January 2, 2022 from BPI. ROSE Company has the discretion to refinance or roll over the loan for at least twelve months from December 31, 2022. REQUIRED: 1. At what amount should the current liability be presented in the statement of financial position? 2. At what amount should the non-current…
On Nov. 25, 2017, an explosion occurred at Stefan company causing extensive property damage to area buildings. By March 10, 2018, claims had been asserted against the entity. The management and counsel concluded that it is probable that the entity would be responsible for damages, and that 3,500,000 is a reasonable estimate of the liability. Stefan’s 10,000,000 comprehensive public policy has a 500,000 deductible clause. The financial statements were issued on March 31, 2018. What amount of liability from lawsuit should be reported on December 31, 2017?
The Commonwealth of Virginia filed suit in October 2016, against Northern Timber Corporation seeking civilpenalties and injunctive relief for violations of environmental laws regulating forest conservation. When the financial statements were issued in 2017, Northern had not reached a settlement with state authorities, but legal counseladvised Northern Timber that it was probable the ultimate settlement would be $1,000,000 in penalties. The following entry was recorded:Loss—litigation �� 1,000,000Liability—litigation�� 1,000,000Late in 2018, a settlement was reached with state authorities to pay a total of $600,000 to cover the cost ofviolations.Required:1. Prepare any journal entries related to the change.2. Briefly describe other steps Northern should take to report the change
Sunrise Company provided the following information on December 31, 2019: A personal injury liability suit for P500,000 was brought against Sunrise Company in March 2019. The management and legal counsel of Sunrise Company concluded that it is not probable that Sunrise Company will be responsible for damages and that P150,000 is the best estimate of the damages. In July 2019, Sunrise Company became involved in a tax dispute with the BIR pertaining to 2018 income tax. In December 2019, a judgment for P400,000 was assessed against Sunrise Company by the tax court. Sunrise Company is appealing the amount of judgment. The tax advisor and legal counsel of Sunrise Company believed it is probable that the assessment can be reduced on appeal by 50%. Sunrise Company signed as guarantor for P200,000 loan by PNB to Sunset Company, a principal supplier of Sunrise. By reason of financial difficulties, it is probable that Sunrise Company shall pay P200,000 loan with only a 60% recovery anticipated…