What amount should be booked as adjustment to the loss of the company?
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- On December 25, 2019, ABC Oil and Tech, Inc. thorough its monitoring team reported an oil spill happened in the Gulf of Buyacaoan. The news spread fast to all reporting agencies causing the stock price to decline from P100 to P70. The estimated cost of the damage to biodiversity is P5,000,000 and the legal counsel of the firm expected that they will likely win at 40% rate. They booked the estimated cost at full. The reporting period ends December 31, 2019 and the financial statements were approved for issue on March 31, 2020. On February 20, 2020, lawyers expected not to win at 40% rate with new information acquired by a team of experts hired by the company. What amount should be booked as adjustment to the loss of the company?
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- There was an explosion at the plant on December 23, 2021 with damages estimated at $1,385,000. The company has insurance to cover such incidents totaling $5,000,000 if the incident was an accident and $1,000,000 if it was due to company error. The incident was investigated and the explosion found to be due to a faulty gas tank that was last serviced on July 15, 2021. The company policy was to service every 6 months however industry standards was generally 3 months. Management was advised by legal counsel that there was a high probability the company would be held responsible for the damages. Employees were not injured during the incident however the employees’ union has indicated that there are discussions underway relating to filing a $3,000,000 claim for unsafe working conditions. Prepare the journal entries necessary to record the transactions above using appropriate dates. ii.Prepare the adjusting entries necessary at December 31, 2021 in order to properly report interest expense…Texon Oil is being sued for price fixing and environmental damage. The litigation started this year and is expected to last five years. There is no doubt that Texon is guilty, but the settlement cost will be between $3 billion and $22 billion. Explain how you would recommend Texon address this in its current year financial statements.Mama Mo Na Tita Ko Corporation, a manufacturer of cleaning products, is preparing annual financial statements at December 31, 2022. Because of a recently proven health hazard in one of its cleaning products, the government has clearly indicated its intention of having the company recall all cans of this paint sold in the last three months. The management estimates that this recall would cost P800,000. What accounting recognition, if any, should be accorded this situation? Statement 1: Recognize expense of P800,000 and liability of P5,800,000. Statement 2: Disclosed P800,000 as contingent liability in the notes to financial statement. Both statements are correct Both statements are incorrect Only statement 2 is correct Only statement 1 is correct
- Prophet Company signed a long-term purchase contract to buy timber from the U.S. Forest Service at $300 per thousand board feet. Under these terms, Prophet must cut and pay $6,000,000 for this timber during the next year. Currently, the market value is $250 per thousand board feet. At this rate, the market price is $5,000,000. Jerry Herman, the controller, wants to recognize the loss in value on the year-end financial statements, but the financial vice president, Billie Hands, argues that the loss is temporary and should be ignored. Herman notes that market value has remained near $250 for many months, and he sees no sign of significant change. Instructions (a) What are the ethical issues, if any? (b) Is any particular stakeholder harmed by the financial vice president's decision? (c) What should the controller do?On December 15, 2023, an employee filed a lawsuit against Bojack Company for damages suffered when one of Bojack’s equipment malfunctioned in August of 2023. The legal counsel of the company believes that it is probable that Bojack will pay the following damages: Probability Estimated Litigation Cost 50% P400,000 30% 700,000 20% 550,000 Bojack Company provided a 10% risk adjustment factor. Using the expected value method, how much is the provision that should be recognized by Bojack Company on December 31, 2023?ABC Corporation a manufacturer of cleaning products is preparing annual financial statements at December 31, 2020. Because of a recently proven health hazard in one of its cleaning products, the PH government has clearly indicated its intention of having ABC recall all can of this paint sold in the last three months. The management of ABC estimates that this recall would cost P5,800,000. What accounting recognition, if any, should be accorded this situation?
- On September 1, 2021, Laguna Grill determined that it will need to purchase 100,000 kilos of tuna fish on January 31, 2022. Because of the volatile fluctuation in the price of tuna fish, on September 1, 2021, the entity negotiated a forward contract with a reputable financial institution for the entity to purchase 100,000 kilos of tuna fish on January 31, 2022, at a price of P8,000,000 or P80 per kilo. The forward contract is designated as a cash flow hedge. The market price of tuna fish per kilo is P78 on December 31, 2021, and P75 on January 31, 2022. Required: Prepare journal entries for 2021 and 2022. agavtay Company is a golf course developer that constructs approximately 5 courses each year. On July 1, 2021, the entity has agreed to buy 5,000 trees on March 1, 2022 to be planted in the courses it intends to build. To protect itself from the variability of the market price of trees, the entity entered into a forward contract with a reputable bank. The price is set at P1,500…On January 1, 2020, Beyonce Inc. announced the decision to close its branch located in North Luzon and terminate all 200 employees in that branch. Beyonce will pay P20,000 per employee as a result of the termination.Nevertheless, the company needs to retain at least 20% of the branch’s employees until its closure in eight months. This is to ensure that the closing will wind-up as planned. Retained employees for the next eight months shall receive a P60,000 payment at the end of the eight months instead of the P20,000. Beyonce finally decided to retain 50 employees until the branch is closed in eight months.How much should be recognized as termination benefit? a. 3,000,000 b. 4,000,000 c. 2,000,000 d. 6,000,000As a result of a recent acquisition, PT ABC plans to close a factory in 10 months and, at that time, terminate employment of all of the remaining employees at the factory. Because PT ABC needs the expertise of the employees at the factory to complete some contracts, it announce a plan of termination as follows. Each employee who stand and renders service until the closure of the factory will receive on the termination date a cash payment of $50,000, employees leaving before the closure of the factory will receive $ 20,000. There are 1,200 employees at the factory . At the time of the announcing the plan, PT ABC expects 200 of them to leave before the closure Required :Determine the amount of termination benefits and short term employee benefit in accordance with IAS 19 Employee Benefits?
- 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?On February 5, 2021, an employee filed a P2,000,000 lawsuit against ABC Company for damages suffered when one of ABC's plant exploded on December 29, 2020. ABC ’s legal counsel expects the company will probably lose the lawsuit and estimates the loss to be P500,000. The employee has offered to settle the lawsuit out of court for P900,000, but ABC will not agree to the settlement. In its December 31, 2020 balance sheet, what amount should ABC report as liability from lawsuit? A. 500,000 B. 900,000 C. 1,000,000 D. 2,000,000Iron Man 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 probable 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…