Beautiful Company is involved in litigation regarding a faulty product sold in a prior year during 2021. The company has
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Beautiful Company is involved in litigation regarding a faulty product sold in a prior year during 2021. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 40% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be P500,000.
How much is the Provision to be reported at December 31, 2021?
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- Waterway Shoes Foot Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 45% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be $815000. What is the required journal entry as a result of this litigation? Debit Litigation Expense for $366750 and credit Litigation Liability for $366750. Debit Litigation Expense for $448250 and credit Litigation Liability for $448250. No journal entry is required. Debit Litigation Expense for $815000 and credit Litigation liability for $815000.Tender Foot, Inc., is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that it may lose the case. The attorney estimated that there is a 50% chance of losing. The attorney estimated that the amount of any payment would be between P500,000 and P800,000 with P500,000 as the best estimate. How much should be recognized as a liability?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
- On December 31, 2019, Home Company was a defendant in a pending lawsuit. The suit arose from the alleged defect of a product that Home sold in 2015. In the opinion of Home’s attorney, it is probable that Home will have to pay P500,000 and it is reasonably possible that Home will have to pay additional P100,000 as a result of this lawsuit. What amount needs to be disclosed only?Kelly Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 40% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be P 500,000. What is the required journal entry as a result of this litigation? *a. Debit Litigation Expense for P 500,000 and credit Litigation liability for P 500,000b. No journal entry is requiredc. Debit Litigation Expense for P 200,000 and credit Litigation Liability for P 200,000d. Debit Litigation Expense for P 300,000 and credit Litigation Liability for P 300,000On March 1, 2019, a suit was filed against Eloise Company for patent infringement. Eloise's legal counsel believed an unfavorable outcome is probable and estimated that the entity will have to pay between P850,000 and P900,000 in damages. However, Eloise's legal counsel is of the opinion that P600,000 is a better estimate than amount in the range. any other The situation was unchanged when December 31, 2019 financial statements were released on February 15,2020. What amount should be accrued as liability on December 31, 2019 in connection with this law suit?
- In August 2021, a company's worker was injured in the factory in an accident partially the result of his own negligence. The worker has sued the company for P800,000. The company's counsel believes it is possible but not probable that the outcome of the suit will be unfavorable, and that the settlement would cost the company from P250,000 to P500,000. At year-end, the company should A. disclose the existence of a contingent liability with a range of P250,000 to P500.000. B. disclose the existence of a contingent liability for P375,000. C. record a liability of P375.000. D. do nothing. A suit for breach of contract seeking damages of P2,400,000 was filed by an author against a company on October 4, 2021. The company's legal counsel believed that an unfavorable outcome is probable. A reasonable estimate of the award to the plaintiff is between P600,000 and P1,800,000. No amount within this range is a better estimate of potential damages than any other amount. At yearend, the company…Lapalette Inc. is being sued by a customer for $500,000 related to damages from the sale of defective products. Legal counsel has advised Lapalette that there is a 70% likelihood that the company will be found liable; however, the normal settlement for this type of case is between $200,000 and $350,000, with payouts within this range equally likely. Lapalette follows ASPE. Based on this information, what amount should Lapalette record as a contingent liability? Question 5 options: $275,000 $350,000 $200,000 $192,500Acme Corp. is being sued for $20,000,000 due to their continued provision of malfunctioning, dangerous products. One customer in particular grew frustrated with these failings and initiated the lawsuit. Acme Corp's sales are about $50 million per year. On December 31st, 2020, their lawyer states: "It's likely that we will win this case, and the lawsuit will probably be dropped shortly." On December 31st, 2021, their lawyer states: "We got unlucky with the judge that was chosen for the case, and only have a 50% chance of winning. I think we should probably settle. They should be happy to settle for $2,000,000." On December 31st, 2022, their lawyer states: "They didn't accept our settlement offer and we're gonna lose." Instructions 1) In accounting, what do we call this type of situation? 2) Detail the impact to the financial statements on December 31, 2020 and explain your rationale. 3) Detail the impact to the financial statements on December 31, 2021 and explain your rationale. 4)…
- GINGERBREAD Company is involved in a litigation regarding a faulty product sold in a prior year. The entity has consulted with lawyer and determined that there is a 50% chance of losing. The lawyer estimated that the amount of any payment would be between ₱500,000 to ₱800,000 with ₱500,000 as the best estimate. What is the required journal entry as a result of this litigation? * a. No journal entry is required b. Debit Litigation expense and credit Litigation liability for ₱ 500,000 c. Debit Litigation expense and credit Litigation liability for ₱ 250,000 d. Debit Litigation expense and credit Litigation liability for ₱ 650,000On February 5, 2020, an employee filed a P2,000,000 lawsuit against Superman Company for damages suffered when plant of the entity exploded on December 29, 2019. The entity's legal counsel believed the entity will probably lose the lawsuit and estimated the loss to be P500,000. The employee has offered to settle the lawsuit out of court for P900,000 but the entity will not agree to the settlement. On December 31, 2019, what amount should be reported as accrued liability.In 2019, five people died in a car accident, possibly due to the products sold by SH Limited. Legal proceedings are started seeking damages of $3 million from SH Limited. Up to the date of approval of financial statements for the year ended 31 December 2019, the lawyers of SH Limited advised that it is probable that it will not be found liable. However, when SH Limited prepares the financial statements for the year ended 31 December 2020, its lawyers advised that, owing to developments in the case, it is probable that it will be found liable. According to HKAS 37 Provisions, Contingent Liabilities and Contingent Assets, what accounting treatment for SH Limited is required: (a) at 31 December 2019 (b) at 31 December 2020