ance that the entity will be required to pay damages of P1 million (the amount that was recently awarded by the same judge in a similar case). Other amounts of damages are unlikely.
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ABC is a defendant in a breach of patent lawsuit. If the court rules in favor of the claimant, the lawyers believe that there is a 60 percent chance that the entity will be required to pay damages of P2 million (them amount sought by the claimant) and a 40 per cent chance that the entity will be required to pay damages of P1 million (the amount that was recently awarded by the same judge in a similar case). Other amounts of damages are unlikely.
The court is expected to rule the following year (in late December 2023). There is no indication that the claimant will settle out of court. ABC's lawyers believe there is a probability of very slightly over 50% that ABC will successfully defend the case.
A 7 percent risk adjustment factor to the cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An appropriate discount rate is 10 percent per year.
What amount of provision must be recorded from the lawsuit as of December 31, 2022?
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- SME A is a defendant in a breach of patent lawsuit. If the court rules in favor of the claimant, the lawyers believe that there is a 60 percent chance that the entity will be required to pay damages of P2 million (them amount sought by the claimant) and a 40 per cent chance that the entity will be required to pay damages of P1 million (the amount that was recently awarded by the same judge in a similar case). Other amounts of damages are unlikely. The court is expected to rule the following year (in late December 2023). There is no indication that the claimant will settle out of court. SME A's lawyers believe there is a probability of very slightly over 50% that SME A will successfully defend the case. A 7 percent risk adjustment factor to the cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An appropriate discount rate is 10 percent per year.What amount of provision must be recorded from the lawsuit as of December 31, 2022?An entity is the defendant in a patent infringement lawsuit. The entity’s lawyers believe there is a30% chance that the court will dismiss the case and the entity will incur no outflow of economicbenefits. However, if the court rules in favor of the claimant, the lawyers believe that there is a20% chance that the entity will be required to pay damages of ₱800,000 (the amount sought bythe claimant) and an 80% chance that the entity will be required to pay damages of ₱400,000(the amount that was recently awarded by the same judge in a similar case). Other outcomes areunlikely.The court is expected to rule in late December 20x2. There is no indication that the claimant willsettle out of court. A 7% risk adjustment factor to the probability-weighted expected cash flows isconsidered appropriate to reflect the uncertainties in the cash flow estimates. An appropriatediscount rate is 10% per year. How much is the provision for lawsuit at December 31, 20x1?a. 436,360 b. 446,908 c. 326,836…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.…
- During 2022, an entity is the defendant in a patent infringement lawsuit. The lawyers believe that 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 the damages of P100,000 and 80% chance that the entity will be required to pay damages of P200,000.00. Other outcomes are unlikely.The court is expected to rule in late December 2023. 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 estimate. An appropriate discount rate is 5% per year. The present value of 1 at 5% for one period is 0.95.What is the undiscounted provision before risk adjustment?What amount should be reported as provision for lawsuit on December 31, 2022?During 2020, EFG 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 2022. 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 and for two periods is 0.91.A.) What is the amount of undiscounted cash flows for the provision? B.) What is the measurement of the…Smith Co. filed suit against Western, Inc., seeking damages for patent infringement. Western’s legal counsel believes it is probable that Western will have to pay an estimated amount in the range of $75,000 to $175,000, with all amounts in the range considered equally likely. How should Western report this litigation?a. As a liability for $75,000 with disclosure of the range. b. As a liability for $125,000 with disclosure of the range. c. As a liability for $175,000 with disclosure of the range. d. As a disclosure only. No liability is reported.
- In 2021, a lawsuit was filed against Keri Keri Co. for patent infringement. The plaintiff is claiming ₱400M in damages. Keri Keri’s legal counsel believes that it is probable that Keri Keri will lose the lawsuit and pay damages of not less than ₱40M but not more than ₱400M. The probability of any amount within the range is as likely as any other amount also within the range. The plaintiff has offered to settle the lawsuit out of court for ₱360M but Keri Keri did not agree to the settlement.How much is provision to be reported in Keri Keri’s year-end financial statements? a. P360,000,000 b. P220,000,000 c. P400,000,000 d. P40,000,000Aviation Systems is involved in a $10 million lawsuit filed against one of its suppliers, Electronic Innovators. The litigation is in final appeal, and legal counsel advises that it is probable that Aviation Systems will win the lawsuit and be awarded somewhere between $6 and $10 million. How should Aviation Systems account for this event?Toy Company provided the following facts regarding pending litigation on December 31, 2020: • The entity is defending against a first lawsuit and believes there is a 51% chance it will lose in court. The entity estimates that damages will be P1,000,000. • The entity is defending against a second lawsuit for which management believes it is virtually certain to lose in court. •If it loses the lawsuit, management estimates damages will fall somewhere in the range of P3,000,000 to P5,000,000 with each amount in that range equally likely to occur. • The entity is defending against a third lawsuit but the relevant loss will only occur far into the future. The present values of the endpoints of the range are P1,500,000 and P2,500,000. The management believes the effects of time value of money on these amounts are material but also believes the timing of these amounts is uncertain. The entity is defending against a fourth lawsuit and believes there is only a 25% chance it will lose in court.…
- Toy Company provided the following facts regarding pending litigation on December 31, 2020: • The entity is defending against a first lawsuit and believes there is a 51% chance it will lose in court. The entity estimates that damages will be P1,000,000. • The entity is defending against a second lawsuit for which management believes it is virtually certain to lose in court. •If it loses the lawsuit, management estimates damages will fall somewhere in the range of P3,000,000 to P5,000,000 with each amount in that range equally likely to occur. • The entity is defending against a third lawsuit but the relevant loss will only occur far into the future. The present values of the endpoints of the range are P1,500,000 and P2,500,000. The management believes the effects of time value of money on these amounts are material but also believes the timing of these amounts is uncertain. The entity is defending against a fourth lawsuit and believes there is only a 25% chance it will lose in court.…In May 2021, Cruiser Company filed suit against Stallman, Inc. seeking P850,000 damages for patent infringement. A court verdict in November 2021 awarded Cruiser P600,000 in damages, but Stallman's appeal is not expected to be decided before 2021. Cruiser's counsel believes it is probable but not virtually certain that Cruiser will be successful against Stallman for an estimated amount in the range between P300,000 and P450,000, with P400,000 considered the most likely amount. What amount should Cruiser record as a contingent asset from lawsuit in the year ended December 31, 2021? None 300,000 400,000 600,000Smart Company provided the following information as of December 31, 2019:• Smart is the plaintiff in a lawsuit which would award damages normally set at the maximum of P1,000,000. Its legal counsel believes that is it probable that the action filed will be enforced by the court.• The entity is defending a lawsuit for patent infringement. The entity’s legal counsel believes that there is a 25% chance that the business will win the lawsuit. Damages payable ranges from P600,000 to P1,800,000.• On February 16, 2020, the local government is in the process of investigating an environmental violation committed by the entity last November. It is probable that the business will pay fees in relation to said violation and estimates the best amount at P1,000,000.• Smart is also involved in a lawsuit for a dispute with a customer. On December 31, 2019, the attorneys believe that it will remotely result to a favorable outcome. Expected damages would be 50% for P1,000,000, 20% for P3,000,000 and 30%…