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
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Q: 2018 Conceptual Framework
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- 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).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 yearTender 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?
- Reeves Co. filed suit against Higgins, Inc., seeking damages for copyright violations. Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of $100,000 to $200,000, with all amounts in the range considered equally likely. How should Higgins report this litigation? Multiple Choice As a liability for $100,000 with disclosure of the range. As a liability for $150,000 with disclosure of the range. As a liability for $200,000 with disclosure of the range. As a disclosure only. No liability is reported.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.
- 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?A truck owned and operated by Ward Company was involved in an accident with an auto driven by Stillman on January 12, 2020. Ward Company received notice on April 24, 2020 of a lawsuit for P800, 000 damages for a personal injury suffered by Stillman. Ward’s counsel believes it is reasonably possible that Stillman will be successful against the company for an estimated amount in the range between P100, 000 and P400, 000. No amount within this range is a better estimate of better potential damages than any other amount. It is expected that the lawsuit will be adjudicated in the latter part of 2021. What amount of loss should Ward accrue at December 31, 2020?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 300,000
- Sheila 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…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?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.…