ABC Company is the defendant in a patent infringement suit filed by XYZ Company in 2020. At Dec. 31, 2020, ABC determined that XYZ would probably be successful against ABC for an estimated amount of P5 million. ABC appropriately accrued the loss for the year ended Dec. 31, 2020. On Oct. 31, 2021, ABC Company and XYZ Company agreed to a settlement for a cash payment of P3.8 million and the transfer of ABC Company's patent to XYZ Company. On such date, the patent had a carrying value of P2 million. What would be the effect of this settlement on ABC's profit for the year ended Dec. 31, 2022?
ABC Company is the defendant in a patent infringement suit filed by XYZ Company in 2020. At Dec. 31, 2020, ABC determined that XYZ would probably be successful against ABC for an estimated amount of P5 million. ABC appropriately accrued the loss for the year ended Dec. 31, 2020. On Oct. 31, 2021, ABC Company and XYZ Company agreed to a settlement for a cash payment of P3.8 million and the transfer of ABC Company's patent to XYZ Company. On such date, the patent had a carrying value of P2 million. What would be the effect of this settlement on ABC's profit for the year ended Dec. 31, 2022?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter12: Intangibles
Section: Chapter Questions
Problem 15E
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ABC Company is the defendant in a patent infringement suit filed by XYZ Company in 2020. At Dec. 31, 2020, ABC determined that XYZ would probably be successful against ABC for an estimated amount of P5 million. ABC appropriately accrued the loss for the year ended Dec. 31, 2020. On Oct. 31, 2021, ABC Company and XYZ Company agreed to a settlement for a cash payment of P3.8 million and the transfer of ABC Company's patent to XYZ Company. On such date, the patent had a carrying value of P2 million.
What would be the effect of this settlement on ABC's profit for the year ended Dec. 31, 2022?
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