Pitt Company is the defendant in a lawsuit filed by Hoffman in 2020 disputing the validity of a copyright held by Pitt. At December 31, 2020, Pitt determined that Hoffman would probably be successful against Pitt for an estimated amount of $800,000. Appropriately, an $800,000 loss was accrued by a charge to income of Pitt for the year ended December 31, 2020. On December 15, 2021, Pitt and Hoffman agreed to a settlement providing for cash payment of $500,000 by Pitt to Hoffman and transfer of Pitt's copyright to Hoffman. The carrying amount of the copyright on Pitt's accounting records was $120,000 at December 15, 2021. a. What would be the effect of the settlement of this liability on Pitt's income before income tax in 2021? b. Record the entry on December 15, 2021 for Pitt Company.

Pitt Company is the defendant in a lawsuit filed by Hoffman in 2020 disputing the validity of a copyright held by Pitt. At December 31, 2020, Pitt determined that Hoffman would probably be successful against Pitt for an estimated amount of $800,000. Appropriately, an $800,000 loss was accrued by a charge to income of Pitt for the year ended December 31, 2020. On December 15, 2021, Pitt and Hoffman agreed to a settlement providing for cash payment of $500,000 by Pitt to Hoffman and transfer of Pitt's copyright to Hoffman. The carrying amount of the copyright on Pitt's accounting records was $120,000 at December 15, 2021. a. What would be the effect of the settlement of this liability on Pitt's income before income tax in 2021? b. Record the entry on December 15, 2021 for Pitt Company.

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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