17. In Year 1, Better Sleep Company began to receive complaints from physicians that patients were experiencing unexpected sideeffects from the company's sleep apnea drug. The company took the drug off the market near the end of Year 1. During Year 2,the company was sued by 1,000 customers who had had a severe allergic reaction to the company's drug and requiredhospitalization. At the end of Year 2, the company's attorneys estimated a 60 percent chance the company would need to makepayments in the range of $1,000 to $5,000 to settle each claim, with all amounts in that range being equally likely. At the end ofYear 3, while none of the cases had been resolved, the company's attorneys now estimated an 80 percent probability thecompany would be required to make payments in the range of $2,000 to $7,000 to settle each claim. In Year 4, 400 claims weresettled at a total cost of $1.2 million. Based on this experience, the company believes 30 percent of the remaining cases will besettled for $3,000 each, 50 percent will be settled for $5,000, and 20 percent will be settled for $10,000.Required:Prepare journal entries for Years 1-4 related to this litigation.

In year 1, There are no claims, hence no journal entry is required as per the standards. In year…

Answered: In Year 1, Better Sleep Company began…

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter6: Deductions And Losses: In General

Section: Chapter Questions

Problem 1RP

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In Year 1, began to receive complaints from physicians that patients were experiencing unexpected side effects from the company’s sleep apnea drug. The company took the drug off the Market near the end of Year 1. During Year 2, the company was sued by 800 customers who had a severe allergic reaction to the company’s drug and required hospitalization. At the end of Year 2, the company’s attorneys estimated a 62% chance the company would need to make payments in the range of $2,500 to $7,000 to settle each claim, with all amounts in that range being equally likely. At the end of Year 3, while none of the cases had been resolved, the company’s attorney now estimated an 80% probability the company would be required to make payments in the range of $3,000 to $10,000 to settle each claim with all amounts in that range being equally likely. In Year 4, 400 claims were settled at a total cost of $2.5 million. Based on this experience, the company believes 30% of the remaining cases will be…
22. A new drug named "EEE" was introduced by Genius Inc. in the market on December 1, 2005. Genius Inc.'s financial year ends on December 31,2005. It was the only company that was permitted to manufacture this patented drug. The drug is used by patients suffering from an irregular heartbeat. On March 31, 2006, after the drug was introduced, more than 1,000 patients died. After a series of investigations, authorities discovered that when this drug was simultaneously used with "BBB," a drug used to regulate hypertension, the patient's blood would clot and the patient suffered a stroke. A lawsuit for GHS100,000,000 has been filed against Genius Inc. The financial statements were authorized for issuance on April 30, 2006. Which of the following options is the appropriate accounting treatment for this post-statement of financial position event under IAS 10? (a) The entity should provide GHS100,000,000 because this is an "adjusting event" and the financial statements were authorized to be…
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At 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 correct
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…
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 $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…
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Kevin is the chief financial officer of PrimeHeal, a biotech lab that researches, develops, and commercializes pharmaceutical drugs for women's health issues. PrimeHeal submits a new drug application to government regulators for a promising new drug for treating hormone deficiency. Two meetings scheduled with regulators to discuss the drug are postponed when the regulator states that unspecified deficiencies with the drug make such discussions premature. The public announcement of each meeting postponement results in a decline of more than 8% in the company stock. When the meeting between regulators and company executives finally happens, PrimeHeal presents yet-to-be published preliminary test data with favourable indicators for the drug. The regulators react positively and give PrimeHeal preliminary regulatory approval contingent on further studies. After the meeting, six sell-side research analysts covering PrimeHeal inquire with Kevin about the meeting. Kevin responds by email and…

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