Chapter 3, Problem 6QAP

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 P10,00 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.

A buyer working with QRS Realty wants to make an offer on a property. To save time, the buyer makes a verbal offer of $210,000 and the seller agrees. The offer is: -invalid because it does not include a closing date-unenforceable because it is not in writing-voidable because the licensee did not review the offer-unilateral because the contract is not exclusive

Sheila Company is engaged in the manufacture of chemicals which it exports to other countries. On December 25, 2021, one of its tanks in the production assembly plant exploded. Unfortunately one of its employees was caught by the accident and suffered severe burns all over his body. For damages sustained because of the explosion, the employee sued Sheila and claimed an amount totaling P10,000,000 for physical injuries sustained. The lawyers of Sheila expect that Sheila Company will probably lose the lawsuit and estimate that the company may have to pay an amount in the range of P5,000,000 to P8,000,000. On March 15, 2022, upon the advice of his lawyers, the injured employees offered to have an out of court settlement of P7,500,000. The offer was tendered on the same date and Sheila on the advice of its legal counsel accepted  the said offer on March 20, 2022. Sheila’s financial statements for the year ended 2021 was issued on March 30, 2022. Sheila’s financial statements for the year…

Irwin is a resident of Wyoming. He sold real estate located in North Carolina to Bethany, LLC, an Ohio-based company. Bethany failed to make payments on the loan. Which state's laws determine the foreclosure process for the property?  (a) Ohio  (b) North Carolina  (c) Wyoming  (d) No state, because the foreclosure process is controlled by federal law.

Husband and Wife are engaged in business of selling product X in Mindanao, where there are many terrorist groups operating in the business area. In 2018, they have a total business net income of 250,000. Decide.       a. Need to file one ITR for 2018, unless impracticable b. NO need to file because they are exempted due to terrorist groups. c. File a separate ITR under Section 51 (D), unless impracticable d. File a consolidated return on May 15, 2019, under Sec 51 (D) e. None of the above

Thompson’s house was destroyed by fire and claims were filed with the insurance company.  The insurance company (insurer) hired Cannon to investigate the fire as it was suspicious about the cause.  Subsequently, the insurer denied the claims based on Cannon’s report.  Thompson sued the insurer and Cannon.  Thompson claimed to be a third party beneficiary of the Cannon-insurer contract.     Is Thompson correct?  If not, what type of beneficiary is he and why? ​

D is indebted to C for P10,000. For the purpose of defrauding C, D sold his only parcel of land to X valued P10,000. X has no knowledge of the intention of D.   a. The contract D and X is binding. b. The contract is voidable because S is in bad faith. c. The right of C is to rescind the contract because the transaction is fraudulent. d. The contract between D and X is rescissible.

A 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?

An employee sued Harrington Company in late 2023. General counsel concluded that there was an 80 percent probability that the company would lose the lawsuit. The range of loss is estimated to be $21,000 to $73,500, with no amount in the range more likely than any other. They settled the lawsuit in 2024, with Harrington making a payment of $63,000. Assume that Harrington Company is a U.S.-based company that is issuing securities to foreign investors who require financial statements prepared accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes. Required: Prepare journal entries for this lawsuit for the years ending December 31, 2023, and December 31, 2024, under (1) U.S. GAAP and (2) IFRS. Prepare the entry(ies) that Harrington would make on the December 31, 2023, and December 31, 2024, conversion worksheets to convert U.S. GAAP balances to IFRS. Record the entry for the litigation liability as per U.S. GAAP. Note: Enter…