2018 Conceptual Framework
Q: GINGERBREAD Company is involved in a litigation regarding a faulty product sold in a prior year. The…
A: Introduction:- A contingent liability is may occur in the future. it should be recorded in books of…
Q: The Commonwealth of Virginia filed suit in October 2014, against Northern Timber Corporation seeking…
A: 1.Prepare journal entry to record treasury stock:
Q: Vaughn Manufacturing is being sued for illness caused to local residents as a result of negligence…
A: A contingency is a situation for which an uncertain outcome arises, and which should be resolved in…
Q: s of P200,000 and an 80% chance that the entity will be required to pay damages of P100,000. Other…
A: There is a rule under GAAP that if the estimation of any liability could be probable and can be…
Q: How much provision for damages shall be included in the liability section as of December 31, 2022?
A: Provision for liability is the provision or in order words a set amount set aside in order to the…
Q: During 2014, Odyssey Company is the defendant in a patent infringement lawsuit. The entity's lawyers…
A: There is a rule under GAAP that if the estimation of any liability could be probable and can be…
Q: Electronic Innovators is the defendant in a $10 million lawsuit filed by one of its customers,…
A: Given information is: Electronic Innovators is the defendant in a $10 million lawsuit filed by one…
Q: SME A is a defendant in a breach of patent lawsuit. If the court rules in favor of the claimant, the…
A: Damages: P2,000,000 with 60 percent chance that the entity will be required to pay this amount…
Q: On January 2, 2021, Dopey Enterprises, Inc. paid P35,200 in legal fees to successfully defend the…
A: On January 1, 2020 Dopey Enterprises, Inc. developed a new machine that reduces the time required to…
Q: Kylie, an employee of Aljur Company, filed a P3.000.000 complaint against the company on December 2,…
A: Provisions are the estimated accruals for the future expenses to be incurred. This is an important…
Q: A truck owned and operated by Abbott Company was involved in an accident with an auto driven by L.…
A: SOLUTION CONSERVATISM CONCEPT - ACCORDING TO THIS CONCEPT BOTH REVENUE AND EXPENSES MUST BE…
Q: The Commonwealth of Virginia filed suit in October 2016, against Northern Timber Corporation seeking…
A: Stock: A kind of investment that are made by the investors, in order to get more returns is…
Q: Explain whether the potential damages receivable for Company A would meet the definition and…
A: A breach of copyright takes place when someone uses a copyright work without the…
Q: Axel Brick Company has a lawsuit pending from a customer claiming $100,000 in damages. Axel's…
A: A contingent liability is a potential liability which may convert into an actual liability through…
Q: On February 5, 2001, an employee filed a P2,000,000 lawsuit against Steel Company for damages…
A: Solution:- Calculation of the amount should Steel report as liability from lawsuit on December 31,…
Q: a 20% chance of being ordered to pay C damages of P10,000. . State whether a contingent liability…
A: A liability whose occurrence depends upon the happening or non happening of future uncertain…
Q: During 2021, Odyssey Company is the defendant in a patent infringement lawsuit. The entity's lawyers…
A: As per IAS 37, provisions are created when it is most likely probably to occur. Once a provision is…
Q: Constant Company is being sued for P4, 000,000 for an injury caused to a child as a result of…
A: A provision is recognised when all of the following criteria are met: A past event gives rise to a…
Q: Sweet Company recently was sued by a competitor for patent infringement. Attorneys have determined…
A: As per the Perdunce Concept Sweet company has to create a Liability for Future Damages and Since…
Q: Aviation Systems is involved in a $10 million lawsuit filed against one of its suppliers, Electronic…
A:
Q: On January 3, 2010, Boyer Corp. owned a machine that had cost $200,000. The accumulated depreciation…
A: Contingency gain refers to when there is no actual gain and only there is a probability that there…
Q: On January 1, 2008, Elyssa Company purchased a patent for a new consumer for a new consumer product…
A: This question deals with the IAS 38 "Intangible asset" As per IAS 38, intangible asset needs to…
Q: Tyrion Company sells motorcycle helmets. In 2021, Tyrion sold 4,000,000 helmets before discovering a…
A: Contingent liability is a probable liability that has not been materialized actually. The liability…
Q: ance that the entity will be required to pay damages of P1 million (the amount that was recently…
A: The discounted provision refers to the format of accounting entry that evaluates the amount of…
Q: On Feb. 5, 20x2, an employee filed a P 2,000,000 lawsuit against Steel Co. for damages suffered when…
A: The law suit damages must be accrued as a loss contingency because an unfavorable outcome is…
Q: d be found liable for a judgment costing Wooten anywhere from $1,800,000 to $9,000,000. However, the…
A: Provisions: The provision is described as an obligation with an uncertain size and time in IAS 37…
Q: ABC Inc. has is being sued by a customer. The plaintiff (customer) claims $50,000 for product…
A: ABC Inc. has is being sued by the customer for product deficiencies = $50000 Lawyer of the company…
Q: Sheila Company is engaged in the manufacture of chemicals which it exports to other countries. On…
A: As per IAS -10 Events after reporting period are the events which take place in between date of…
Q: Superb Corporation is being sued for illness caused to local residents as a result of negligence on…
A: IAS 37 Provisions, Contingent Liabilities and Contingent Assets defines provision as the liability…
Q: On January 5. 2022. a company received a P5,000,000-complaint from one of its employees who suffered…
A: Solution Explanation- Contingent liability is a liability or a potential loss that mau occur in…
Q: Nia company is involved in litigation regarding a faulty product sold in a prior year. The entity…
A: There is a 40% chance of losing the case and in case of losing the case the payment would be…
Q: Davenport Corp. sells William's Furnishings Co., $60,000 worth of couches, chairs, and lounges for…
A: In the given question the goods worth $60000 sold by Davenport Crop.to William's Furnishings Co.to…
Q: Caplan Pharma, Inc., recently was sued by a competitor for possible infringement of the competitor’s…
A: Cost Accounting Standards: The cost accounting standards are the standards set by a board which is…
Q: Weaver Company is being sued by a former employee, Weaver believes that there is a remote chance…
A: Definition: Contingent liability: It is a potential liability of a company that depends on a future…
Q: Tokwa Inc. is involved in litigation regarding a faulty product sold in a prior year. The company…
A: Journal entries are required when the chance of loss is certain.
Q: Betty Foods has separate patents for its chocolate chip cookie dough and vanilla ice cream. In the…
A: Capitalization of legal fees: any legal fees which is related to patents is to be capitalized only…
Q: Pitchfork Company is being sued by a competitor in a lawsuit alleging patent infringement.…
A: Introduction: A contingent liability is an obligation or prospective loss that may arise in the…
Q: In May 2019, Colt Company filed suit against Johnson Company seeking P1,900,000 damages for patent…
A: A contingent asset is a possible asset that arises from a past event and its existence will be…
Q: Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its…
A: a. Journalize the contingent liabilities associated with the hazardous materials spill.
Q: Several months ago, Jones Company experienced a spill of hazardous materials into the White River…
A: Definition: Contingent liability: It is a potential liability of a company that depends on a…
Q: Buchanan Company recently was sued by a competitor for patent infringement. Attorneys have…
A: Contingencies refer to the possibility of future losses or future gains. The loss contingency refer…
Q: Superb Corporation is being sued for illness caused to local residents as a result of negligence on…
A: As per IFRS 37, A provision is an present obligation which arises from past obligating event, in…
Q: 18. During 2011, Odyssey Company is the defendant in a patent infringement lawsuit. The entity's…
A: Computation of adjusted cash flow: Weighted probabilities 20% *200,000 *70% P28,000…
Q: Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its…
A: Liabilities depending on the occurrence of an undetermined future event are known as contingent…
Q: P incurs $8,000 of damages because of D's negligent handling of radioactive waste. The…
A: when there is case of loss for one party due to negligence of other party . The party who Suffer…
Q: On February 5, 2001, an employee filed a P2,000,000 lawsuit against Steel 5 points Company for…
A: Explanation: The Company must recognize lawsuit damages when, 1. The Unfavorable outcome of the case…
Q: In 2021, a lawsuit was filed against Keri Keri Co. for patent infringement. The plaintiff is…
A: Under the expected value method of measuring a provision, if we have a range of possible outcomes,…
Q: During 2011, Odyssey Company is the defendant in a patent infringement lawsuit. The entity's lawyers…
A: Expected cash flows are determined when various cash flows are expected to occur at same time with…
Q: C has initiated a lawsuit against Agency A for recovery of damages when accidentally one of the…
A: Contingent liability or contingent asset is a probable liability or asset for which the recognition…
Company A is suing Company B for $500 000 in relation to a breach of copyright. Company B produced designer clothes identical to those for which Company A holds legal rights, without permission and without paying Company A for permission to use the designs. Legal experts have advised Company A that it has a strong case and that there is a 50% likelihood that Company B will be required to pay damages, although these are estimated at $400 000.
Explain whether the potential damages receivable for Company A would meet the definition and recognition criteria of an asset, applying the principles in the Proposed Framework (2018 Conceptual Framework).
Step by step
Solved in 2 steps
- Tender Foot, Inc., is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that it may lose the case. The attorney estimated that there is a 50% chance of losing. The attorney estimated that the amount of any payment would be between P500,000 and P800,000 with P500,000 as the best estimate. How much should be recognized as a liability?a b Weaver Company is being sued by a former employee, Weaver believes that there is a remote chance that the employee will win. The employee suing Weaver for damages of $40,000 Gulf Refinery had a gas explosion on one of its oil rigsGulf believes it is likely that it will have to pay environmental clean-up costs and damages in the future due to the gas explosion. Gulf cannot estimate the amount of the damages Lawson Enterprises estimates that it will have to pay $75,000 in warranty repairs next yearSheila Company is engaged in the manufacture of chemicals which it exports to other countries. On December 25, 2021, one of its tanks in the production assembly plant exploded. Unfortunately one of its employees was caught by the accident and suffered severe burns all over his body. For damages sustained because of the explosion, the employee sued Sheila and claimed an amount totaling P10,000,000 for physical injuries sustained. The lawyers of Sheila expect that Sheila Company will probably lose the lawsuit and estimate that the company may have to pay an amount in the range of P5,000,000 to P8,000,000. On March 15, 2022, upon the advice of his lawyers, the injured employees offered to have an out of court settlement of P7,500,000. The offer was tendered on the same date and Sheila on the advice of its legal counsel accepted the said offer on March 20, 2022. Sheila’s financial statements for the year ended 2021 was issued on March 30, 2022. Sheila’s financial statements for the year…
- During 2011, Odyssey Company is the defendant in a patent infringement lawsuit. The entity's lawyers believe there is a 30% chance that the court will dismiss the case and the entity will incur no outflow of economic benefits. However, if the court rules in favor of the claimant, the lawyers believe that there is a 20% chance that the entity will be required to pay damages of P200,000 and an 80% chance that the entity will be required to pay damages of P100,000. Other outcomes are unlikely. The court is expected to rule in late December 2012. There is no indication that the claimant will settle out of court. A 7% risk adjustment factor to the probability-weighted expected cashflows is considered appropriate to reflect the uncertainties in the cashflow estimates. An appropriate discount rate is 5% per year. The present value of 1 at 5% for one period is 0.95. What is the measurement of the provision for lawsuit? a. 100,000 b. 84,000 c.…Beautiful Company is involved in litigation regarding a faulty product sold in a prior year during 2021. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 40% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be P500,000.How much is the Provision to be reported at December 31, 2021?In August, 2022, a worker was injured in the factory in an accident, partially the result of his own negligence. The worker has sued Mikell Co. for $800,000. Counsel believes it is reasonably possible that the outcome of the suit will be unfavorable and the settlement would cost the company from $250,000 to $500,000.
- On Dec. 31, 2020, an employee filed a P3,000,000 lawsuit against Siomai Company for damages suffered when one of Siomai’s plants exploded on July 20, 2020. Siomai’s legal counsel expects the company will lose the lawsuit and estimates the loss to be between P500,000 and P1,500,000. The employee has offered to settle the lawsuit out of court for P900,000 but Siomai will not agree to the settlement. In its Dec. 31, 2020 statement of financial position, what amount should Siomai Company report as a provision from the lawsuit?Kelly Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 40% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be P 500,000. What is the required journal entry as a result of this litigation? *a. Debit Litigation Expense for P 500,000 and credit Litigation liability for P 500,000b. No journal entry is requiredc. Debit Litigation Expense for P 200,000 and credit Litigation Liability for P 200,000d. Debit Litigation Expense for P 300,000 and credit Litigation Liability for P 300,000During 2014, Odyssey Company is the defendant in a patent infringement lawsuit. The entity's lawyers believe there is a 30% chance that the court will dismiss the case and the entity will incur no outflow of economic benefits. However, if the court rules in favor of the claimant, the lawyers believe that there is a 20% chance that the entity will be required to pay damages of P200,000 and an 80% chance that the entity will be required to pay damages of P100,000. Other outcomes are unlikely. The court is expected to rule in late December 2015. There is no indication that the claimant will settle out of court. A 7% risk adjustment factor to the probability-weighted expected cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An appropriate discount rate is 5% per year. The present value of 1 at 5% for one period is 0.95. What is the measurement of the provision for lawsuit on December 31, 2014?
- C has initiated a lawsuit against Agency A for recovery of damages when accidentally one of the vehicles owned by the agency collided with the car then driven by C. The Chief Legal Counsel of the Agency estimates from experience that at December 2015, the entity has a 60% chance of winning the lawsuit and thereby avoiding the payment of damages. Furthermore, the counsel estimates that the agency has 20% chance of being ordered to pay C damages of P100,000 and a 20% chance of being ordered to pay C damages of P10,000. . State whether a contingent liability or contingent asset exists. Explain your answers by stating the criteria of your answers belowC has initiated a lawsuit against Agency A for recovery of damages when accidentally one of the vehicles owned by the agency collided with the car then driven by C. The Chief Legal Counsel of the Agency estimates from experience that at December 2015, the entity has a 60% chance of winning the lawsuit and thereby avoiding the payment of damages. Furthermore, the counsel estimates that the agency has 20% chance of being ordered to pay C damages of P100,000 and a 20% chance of being ordered to pay C damages of P10,00 Use the facts given in No. 1, but this time assumes that on December 31, 2015, the Chief Legal Counsel of Agency A estimates from past experience that the possibility of losing the case filed by C is remote. -State whether a contingent liability or contingent asset exists.-Explain your answers by stating the criteria of your answers below.On February 5, 2001, an employee filed a P2,000,000 lawsuit against Steel Company for damages suffered when one of Steel’s plants exploded on December 29,2000. Steel’s legal counsel expects the company will lose the lawsuit and estimates the loss to be between P500,000 and P1,000,000. The employee has offered to settle the lawsuit out of court for P900,000, but Steel will not agree to the settlement. In its December 31, 2000 balance sheet, what amount should Steel report as liability from lawsuit? P2,000,000 P1,000,000 P900,000 P500,000