P incurs $8,000 of damages because of D's negligent handling of radioactive waste. The administrative costs of a trial would be $3,000 (all costs, for all parties and court). Which of the following statements is true damage award. P's legal fees would be $1,000. O Social costs would be zero if P dropped the lawsuit against D. O P's threat value is $8,000. O Litigating this matter is inefficient unless the error costs are $3,000 or more. O Litigating this matter inefficient because the costs definitely outweigh the benefit.
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- 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.Sean sued an unscrupulous person for derogatory remarks which he considered to have besmirched his reputation. The court awarded him an indemnity of P2,000,000 inclusive of P200,000 reimbursement for Attorney’s fees and P100,000 exemplary damages. Compute Jake’s total return on capital.
- Ashley received a civil judgement against Sales Associate Betsy. The judge awarded Ashley $10,000 in compensatory damages and $8,000 in punitive damages. Court costs amounted to $3,000. Because Betsy had insufficient assets to satisfy the judgment, Ashley made a claim to the Recovery Fund, which was accepted. What is the maximum amount that the Recovery Fund reimburse Ashley?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 yearConstant Company is being sued for P4, 000,000 for an injury caused to a child as a result of alleged negligence while the child was visiting the Constant Company plant in March 2018. The suit was filed in July 2018. Constant’s lawyer states that it is probable that Constant will lose the suit and be found liable for a judgement costing anywhere from P400, 000 to P2, 000,000. However the lawyer states that the most probable judgement is P1, 000,000. Instructions:How should Constant report the suit in its 2018 financial statements. Discuss the rationale for your answer. Include in your disclosures, if any, that should be made in Constant’s financial statements
- In a certain civil case, plaintiff was awarded damages by the court in the sum of P20,000 representing profit he failed to realize on account of defendant’s failure to comply with his obligation to said plaintiff. Are those damages taxable against the plaintiff? a. No, because damages awarded are considered return of capital. b. No, because there is no sale transaction or exercise of profession in the awarding of damages. c. Yes, because the damages are not on account of injuries or sickness but for lost profit. d. Answer not givenIn March year 2, an explosion occurred at Nilo Co.'s plant, causing damage to area properties. By May year 2, no claims had yet been asserted against Nilo. However, Nilo's management and legal counsel concluded that it was reasonably possible that Nilo would be held responsible for negligence, and that $3,000,000 would be a reasonable estimate of the damages. Nilo's $5,000,000 comprehensive public liability policy contains a $300,000 deductible clause. In Nilo's December 31, year 2 financial statements, for which the auditor's fieldwork was completed in April year 3, how should this casualty be reported? As a footnote disclosing a possible liability of $300,000. As a footnote disclosing a possible liability of $3,000,000. No footnote disclosure or accrual is required for year 3 because the event occurred in year 2. As an accrued liability of $300,000.Bu Co. is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Bu's lawyer states that it is probable that Bu will lose the suit and be found liable for a judgment costing Bu anywhere from P1,600,000 to P8,000,000. However, the lawyer states that the most probable cost is P 4,800,000. As a result of the above facts, Bu should accrue: *a. a loss contingency of P 4,800,000 and disclose an additional contingency of up to P 3,200,000b. a loss contingency of P 1,600,000 and disclose an additional contingency of up to P 6,400,000c. a loss contingency of P 4,800,000 but not disclose any additional contingencyd. no loss contingency but disclose a contingency of P 1,600,000 to P 8,000,000
- On February 5, 2001, an employee filed a P2,000,000 lawsuit against Steel 5 points Company for damages suffered when one of Steel’s plants exploded on December 29,2000. Steel’s legal counsel expects the company will losethe 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? 2,000,000 1,000,000 900,000 500,000Axel Brick Company has a lawsuit pending from a customer claiming $100,000 in damages. Axel's attorney advises the likelihood the customer will win the lawsuit is reasonably probable. GAAP requires at a minimum that this contingent liability be...Superb Corporation is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Superb’s lawyer states that it is probable that Superb will lose the suit and be found liable for a judgment costing Superb anywhere from $1,200,000 to $6,000,000. However, the lawyer states that the most probable cost is $3,600,000. As a result of the above facts, Superb should accrue Select one: a loss contingency of $3,600,000 and disclose an additional contingency of up to $2,400,000. a loss contingency of $3,600,000 but not disclose any additional contingency. a loss contingency of $1,200,000 and disclose an additional contingency of up to $4,800,000. no loss contingency but disclose a contingency of $1,200,000 to $6,000,000.