17. In Year 1, Better Sleep Company began to receive complaints from physicians that patients were experiencing unexpected sideeffects from the company's sleep apnea drug. The company took the drug off the market near the end of Year 1. During Year 2,the company was sued by 1,000 customers who had had a severe allergic reaction to the company's drug and requiredhospitalization. At the end of Year 2, the company's attorneys estimated a 60 percent chance the company would need to makepayments in the range of $1,000 to $5,000 to settle each claim, with all amounts in that range being equally likely. At the end ofYear 3, while none of the cases had been resolved, the company's attorneys now estimated an 80 percent probability thecompany would be required to make payments in the range of $2,000 to $7,000 to settle each claim. In Year 4, 400 claims weresettled at a total cost of $1.2 million. Based on this experience, the company believes 30 percent of the remaining cases will besettled for $3,000 each, 50 percent will be settled for $5,000, and 20 percent will be settled for $10,000.Required:Prepare journal entries for Years 1-4 related to this litigation.

In year 1, There are no claims, hence no journal entry is required as per the standards. In year…

Answered: In Year 1, Better Sleep Company began…

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter5: Gross Income: Exclusions

Section: Chapter Questions

Problem 27P

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In Year 1, Better Sleep Company began to receive complaints from physicians that patients were experiencing unexpected side effects from the company’s sleep apnea drug. The company took the drug off the market near the end of Year 1. During Year 2, the company was sued by 1,000 customers who had had a severe allergic reaction to the company’s drug and required hospitalization. At the end of Year 2, the company’s attorneys estimated a 60 percent chance the company would need to make payments in the range of $1,000 to $5,000 to settle each claim, with all amounts in that range being equally likely. At the end of Year 3, while none of the cases had been resolved, the company’s attorneys now estimated an 80 percent probability the company would be required to make payments in the range of $2,000 to $7,000 to settle each claim. In Year 4, 400 claims were settled at a total cost of $1.2 million. Based on this experience, the company believes 30 percent of the remaining cases will be settled…
In Year 1, began to receive complaints from physicians that patients were experiencing unexpected side effects from the company’s sleep apnea drug. The company took the drug off the Market near the end of Year 1. During Year 2, the company was sued by 800 customers who had a severe allergic reaction to the company’s drug and required hospitalization. At the end of Year 2, the company’s attorneys estimated a 62% chance the company would need to make payments in the range of $2,500 to $7,000 to settle each claim, with all amounts in that range being equally likely. At the end of Year 3, while none of the cases had been resolved, the company’s attorney now estimated an 80% probability the company would be required to make payments in the range of $3,000 to $10,000 to settle each claim with all amounts in that range being equally likely. In Year 4, 400 claims were settled at a total cost of $2.5 million. Based on this experience, the company believes 30% of the remaining cases will be…
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Fred, a 17-year employee with Sam's Sauna, was fired for poor job performance and poor attendance, after accruing five disciplinary penalties within a 12-month period under the company's progressive disciplinary policy. A week later, Fred told his former supervisor that he had a substance abuse problem. Although there was no employee assistance program in place and the company had not been aware of Fred's condition, their personnel director assisted Fred in obtaining treatment by allowing him to continue receiving insurance benefits and approved his unemployment insurance claim. Fred subsequently requested reinstatement, maintaining that he had been rehabilitated since his discharge and was fully capable of being a productive employee. He pointed to a letter written by his treatment counselor, which said that his prognosis for leading a "clean, sober lifestyle" was a big incentive for him. Fred pleaded for another chance, arguing that his past problems resulted from drug addiction and…
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Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $240,000. The company is contesting the fine. In addition, an employee is seeking $220,000in damages related to the spill. Finally, a homeowner has sued the company for $310,000. The homeowner lives 35 miles from the plant but believes that the incident has reduced the home’s resale value by $310,000. Ayers’ legal counsel believes that it is probable that the EPA fine will stand. In addition, counsel indicates that an out-of-court settlement of $125,000 has recently been reached with the employee. The final papers will be signed next week. Counsel believes that the homeowner’s case is much weaker and will be decided in favor of Ayers. Otherlitigation related to the spill is possible, but the damage amounts are uncertain. a. Journalize the contingent liabilities associated with the hazardous materials spill. Use…
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At the end of the year NYU Hospital, which carries no medical malpractice insurance, had the following list of malpractice claims: Mr. Green, a heart patient, filed a claim for $600,000. Based on Mr. Green’s medical records, the hospital’s attorneys are not confident of winning the case if it goes to trial. If it settled out of court, the settlement could be at least $300,000. How much malpractice loss should NYU accrue? $300,000, and the potential additional loss should be disclosed in the notes; $350,000 $400,000 $600,000 Which one is correct

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