Soft Bound Version for Advanced Accounting 13th Edition
Soft Bound Version for Advanced Accounting 13th Edition
13th Edition
ISBN: 9781260110579
Author: Hoyle
Publisher: McGraw Hill Education
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Chapter 11, Problem 24P

a.

To determine

Determine the appropriate accounting for this lawsuit for the years ending December 31, 2017, and December 31, 2018, under (1) IFRS and (2) U.S. GAAP.

b.

To determine

Prepare the entry that the U.S. parent would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert IFRS balances to U.S. GAAP.

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Sapporo K.K. was sued by a competitor in late 2017, and company management concluded that there was a 55 percent probability that the company would lose the lawsuit. The best estimate of the loss on December 31, 2017, was 4,000,000 yen. In 2018, the lawsuit is concluded with Sapporo paying its competitor 5,000,000 yen on May 15, 2018.   Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes.   Required: Prepare journal entries for this lawsuit for the years ending December 31, 2017, and December 31, 2018, under (1) IFRS and (2) U.S. GAAP. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert IFRS balances to U.S. GAAP.
Fresh Limited, a manufacturer of toothpaste, was taken to court over alleged defamation charges when the company accused a rival toothpaste manufacturer of fraud. Before year end (31 December 2018), the lawyer of Fresh Limited advised that, although losing the case was unlikely, legal fees and settlement costs could amount to $ 900 000 in the event that the court case was lost.        On 04 February 2019, the judge presiding over the case ruled that Fresh should pay $ 1 000 000 to the plaintiff as well as pay all of the plaintiff's legal fees, which amounted to $ 180 000. The financial statements had not yet been authorized for issue at the time of the court ruling.       Required:       Discuss how this information should be treated in the financial statements of Fresh Limited for the year ended 31 December 2018
Harrington Company was sued by an employee in late 2017. General counsel concluded that there was an 75 percent probability that the company would lose the lawsuit. The range of possible loss is estimated to be $35,000 to $90,000, with no amount in the range more likely than any other. The lawsuit was settled in 2018, with Harrington making a payment of $70,000. Assume that a U.S. based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS . Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes. a. Prepare journal entries for this lawsuit for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS b. Prepare the entries that Harrington would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.
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