Business Its Legal Ethical & Global Environment
10th Edition
ISBN: 9781305224414
Author: JENNINGS
Publisher: Cengage
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In 2015, plaintiff was injured by medical malpractice and received a jury verdict of $500,000 ($200,000 for medical care costs, $200,000 for lost income, and $100,000 for pain and suffering). All the medical care costs had been paid by plaintiff's health insurance company, but the submission of such evidence was barred at trial. In 1989, this jurisdiction, in response to a perceived crisis in medical malpractice insurance, abolished the collateral source rule. In post-trial motions in the instant case, the Court should:
Reduce the judgment to $300,000.
Reduce the judgment to $250,000.
Reduce the judgment to $50,000
Not reduce the judgment
Swifty 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. Swifty's lawyer states that it is probable that Swifty will lose the suit and be found liable for a judgment costing Swifty anywhere from $ 1830000 to $ 8960000. However, the lawyer states that the most probable cost is $ 5410000. As a result of the above facts, Swifty should accrue
a loss contingency of $ 1830000 and disclose an additional contingency of up to $ 7130000.
a loss contingency of $ 5410000 and disclose an additional contingency of up to $ 3550000.
no loss contingency but disclose a contingency of $ 1830000 to $ 8960000.
a loss contingency of $ 5410000 but not disclose any additional contingency.
Caplan Pharma, Inc., recently was sued by a competitor for possible infringement of the competitor’s patent on a top-selling flu vaccine. The plaintiff is suing for damages of $15 million. Caplan's CFO has discussed the case with legal counsel, who believes it is possible that Caplan will not be able to successfully defend the lawsuit. The CFO knows that current U.S. accounting guidelines require that come gencies (such as lawsuits) must be disclosed in the annual report when a loss is possible. However, she is unsure whether this rule must be applied in the preparation of interim financial statements. She also knows that disclosure is necessary only if the amount is material, but she is unsure whether materiality should be assessed in relation to results for the interim period or for the entire year. Required Search current U.S. accounting standards to determine whether contingencies are required to be disclosed in interim reports, and, if so, how materiality is to be determined.…
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- 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.arrow_forwardA customer is suing Ephiyu Company for P550,000 in damages because her child was injured in November 2022 while riding an escalator that stopped suddenly in one of its state-of-the-art stores in Makati. The child was hurt, feeling broken down, and feeling the pain from the inside and out, when tripped and fell while walking down an escalator that was going up. Legal counsel feels that the child is partially at fault, and so deserves all the pain, but that it is probable that the lawsuit will be settled for between P250,000 and P550,000, with the following likely outcome: 30% to be settled at P250,000; 45% to be settled at P340.000 and 25% to be settled at P550,000. How much provision for damages shall be included in the liability section as of December 31, 2022?arrow_forwardDuring the year to 31 December 2019, a customer started legal proceedings against TCI Food company, claiming that one of the food products that it manufactures had caused several members of his family to become seriously ill. The company’s lawyers have advised that this action will probably not succeed. Should the company disclose this in its financial statements according to IAS 37?arrow_forward
- 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 $470,000. The company is contesting the fine. In addition, an employee is seeking $540,000 in damages related to the spill. Lastly, a homeowner has sued the company for $300,000. The homeowner lives 30 miles from the plant, but believes that the incident has reduced the home's resale value by $300,000. 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 $230,000 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. Other litigation related to the spill is possible, but the damage amounts are uncertain. a. Journalize the contingent liabilities associated with the hazardous materials…arrow_forwardAt 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 correctarrow_forwardAfter a wedding in 2018, ten people died, possibly as a result of food poisoning from products sold by Ziem Catering Services. Legal proceedings have commenced, seeking damages from Ziem Catering Services but it disputes liability. Up to the date of approval of the financial statements for the year to 31 December 2018, Ziem Catering Services’ lawyers advised that it is probable that it will not be found liable.However, when Ziem Catering Services prepares the financial statements for the year to 31 December 2019, its lawyers advice that, owing to developments in the case, it is probable that it will be found liable. Required:In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, what is the required accounting treatment?i. At 31 December 2018?ii. At 31 December 2019?arrow_forward
- 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 $430,000. The company is contesting the fine. In addition, an employee is seeking $540,000 in damages related to the spill. Lastly, a homeowner has sued the company for $270,000. The homeowner lives 30 miles from the plant, but believes that the incident has reduced the home's resale value by $270,000. 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 $230,000 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. Other litigation related to the spill is possible, but the damage amounts are uncertain. a. Journalize the contingent liabilities associated with the hazardous materials…arrow_forwardCarmen had worked for Sparrow Corporation for thirty years when she died of a heart attack at age 60. She was practically penniless at the time of her death, owed a $12,000 hospital bill, and had a disabled spouse. The company was very concerned about its public image, and rather than run the risk of embarrassment from one of its long-term employees dying and leaving her spouse with insufficient means, the Board of Directors agreed to pay Carmen’s hospital bill and to give her spouse $6,000 per year for the rest of his life. Discuss both sides of the question whether Carmen (or her estate) and her spouse realize any taxable income from the above.arrow_forwardSeveral 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 $248,000. The company is contesting the fine. In addition, an employee is seeking $213,000 in damages related to the spill. Lastly, a homeowner has sued the company for $324,000. The homeowner lives 35 miles from the plant but believes that the incident has reduced the home’s resale value by $324,000. 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 $130,000 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. Other litigation related to the spill is possible, but the damage amounts are uncertain. Required: a. Journalize the contingent liabilities associated with the…arrow_forward
- 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…arrow_forwardOn November 5, 2008, a Breakthrough Company truck was in an accident with an auto driven by McAllen. Breakthrough received notice on January 15, 2009, of a lawsuit for P4,000,000 damages for personal injuries suffered by McAllen. Breakthrough’s counsel believes it is probable that McAllen will be awarded an estimated amount in the range between P2,000,000 and P3,000,000, and no amount is a better estimate of potential liability than any other amount. The accounting year, ends on December 31, and the 2008 financial statements were issued on March 31, 2009. What amount of provision should Breakthrough accrue at December 31, 2008? 3,000,0003,000,000 2,000,0002,000,000 2,500,0002,500,000 4,000,0004,000,000 None of thesearrow_forwardOn Nov. 5, 2016, a Fudge Corp. truck was in an accident with an auto driven by Paul. Fudge received notice on January 15, 2017 of a lawsuit for P 700,000 damages for personal injuries suffered by Paul . The entity's counsel believed it is probable that Paul will be awarded an estimated amount in the range between P 200,000 and P 450,000 and no amount is a better estimate of potential liability than any other amount because each point in the range is as likely as any other. The 2016 financial statements were issued on March 1, 2017. What amount of loss should be accrued on Dec. 31, 2016?arrow_forward
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