Maria Clara Company carried a provision of P4,000,000 in the draft financial statements for the year ended December 31, 2021 in relation to an unresolved court case. On January 31, 2022, when the financial statements for the year ended December 31, 2021 has not yet been authorized for issue, the case was settled and the court decided the final total damages to be paid by the entity at P6,000,000.
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What amount should be adjusted on December 31, 2021 in relation to this event?
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- ROSE Company entered into a lawsuit on December 20, 2021 and recognized on the same date a provision of ₱2,000,000. On February 28, 2022, when the financial statements for the year ended December 31, 2021 had not yet been authorized for issue, the case was settled and the court decided the final total damages to be paid by the entity at ₱3,000,000. In addition, the Company has a loan payable of ₱2,000,000 due on June 30, 2022. On January 1, 2022, before the authorization of the issuance of financial statements, the bank agreed to refinance the loan, extending the maturity to June 30, 2024. Also, another loan amounting to ₱7,000,000 due on December 1, 2022 was obtained by the Company on January 2, 2022 from BPI. ROSE Company has the discretion to refinance or roll over the loan for at least twelve months from December 31, 2022. At what amount should the non-current liability be presented in the statement of financial position? ₱ 2,000,000 ₱…Tyeso Company entered into a lawsuit on December 25, 2020 and recognized on the same date a provision of P2,000,000. On February 28, 2021, when the financial statements for the year ended December 31, 2020 had not yet been authorized for issue, the case was settled and the court decided the final total damages to paid by the entity at P3,000,000. In addition, the Company has a loan payable of P2,000,000 due on June 30, 2021. On January 1, 2021, before the authorization of the issuance of financial statements, the bank agreed to refinance the loan, extending the maturity to June 30, 2023. Also, another loan amounting to P7,000,000 due on December 1, 2021 was obtained by the Company from BDO. TYESO Company has the discretion to refinance or roll over the loan for at least twelve months from December 31, 2021. 1. Compute for the current liability to be presented in the financial position a. P12 million b. P10 million c. P5 million d. P4 million Answer: 2. Compute for…ROSE Company entered into a lawsuit on December 20, 2021 and recognized on the same date a provision of ₱2,000,000. On February 28, 2022, when the financial statements for the year ended December 31, 2021 had not yet been authorized for issue, the case was settled and the court decided the final total damages to be paid by the entity at ₱3,000,000. In addition, the Company has a loan payable of ₱2,000,000 due on June 30, 2022. On January 1, 2022, before the authorization of the issuance of financial statements, the bank agreed to refinance the loan, extending the maturity to June 30, 2024. Also, another loan amounting to ₱7,000,000 due on December 1, 2022 was obtained by the Company on January 2, 2022 from BPI. ROSE Company has the discretion to refinance or roll over the loan for at least twelve months from December 31, 2022. REQUIRED: 1. At what amount should the current liability be presented in the statement of financial position? 2. At what amount should the non-current…
- During 2020, Marian Company was sued by a competitor for P5,000,000 for infringement of a patent. Based on the advice of the legal counsel, the entity accrued the sum of P3,000,000 as a provision in the financial statements for the year ended December 31, 2020. Subsequently, on March 15, 2021, the Supreme Court decided in favor of the party alleging infringement of the patent and ordered the defendant to pay the aggrieved party a sum of P3,500,000. The financial statements were prepared by the entity's management on February 15, 2021 and approved by the Board of Directors on March 31, 2021. Questions: 1. When is the date of authorization for issue of the 2020 financial statements? 2. What amount should be recognized as accrued liability on December 31, 2020 to reflect the event after the reporting period?During 2021, Angela Inc. was sued by a competitor for P5,000,000 for infringement of a patent. Based on the advice of the legal counsel, the entity accrued the sum of P3,000,000 as a provision on December 31, 2021. Subsequently on March 15, 2022, the Supreme Court decided in favor of the party alleging infringement of the patent and ordered the defendant to pay the aggrieved party the sum of P3,500,000. The financial statements were prepared by management on February 15, 2022 and approved by the board of directors on March 31, 2022. What amount should be adjusted on December 31, 2022 in relation to this event?A. 1,000,000B. 1,500,000C. 500,000D. 2,000,000During 2018, Rosanna Company was sued by a competitor for P5,000,000 for infringement of a patent. Based on the advice of the legal counsel, the entity accrued the sum of P3,000.000 as a provision on December 31, 2018. Subsequently, on March 15, 2019, the Supreme Court decided in favor of the party alleging infringement of the patent and ordered the defendant to pay the aggrieved party a sum of P3,500,000. The financial statements were prepared by management on February 15, 2019 and approved by the board of directors on March 31, 2019. The financial statements were prepared by management on February 15, 2019 and approved by the board of directors on March 31, 2019. What amount should be adjusted on December 31, 2018 in relation to this event?
- During 2023, Lowry Company was used by a competitor for P5,000,000 infringement suit of a trademark. Based on the legal counsel’s advice, Lowery accrued the sum of P3,000,000 as a provision. On February 15, 2024, the Supreme Court decided in favor of the party alleging the infringement and ordered the defendant to pay the aggrieved party a sum of P3,500,000. The financial statements of Lowry were approved by the BOD for issue on February 20, 2024. What amount should the Company accrue as provision for the year ended December 31, 2023?1. REALME INC. entered into a lawsuit on December 20, 2021 and recognized on the same date a provision of ₱2,000,000. On February 28, 2022, when the financial statements for the year ended December 31, 2021 had not yet been authorized for issue, the case was settled and the court decided the final total damages to be paid by the entity at ₱3,000,000. In addition, the Company has a loan payable of ₱2,000,000 due on June 30, 2022. On January 1, 2022, before the authorization of the issuance of financial statements, the bank agreed to refinance the loan, extending the maturity to June 30, 2024. Also, another loan amounting to ₱7,000,000 due on December 1, 2022 was obtained by the Company on January 2, 2022 from BPI. REALME INC. has the discretion to refinance or roll over the loan for at least twelve months from December 31, 2022 REQUIRED: WHAT IS THE AMOUNT OF CURRENT LIABILITIES? A. ₱ 4,000,000 B. ₱ 10,000,000 C. ₱ 12,000,000 D. ₱ 5,000,000 WHAT IS THE AMOUNT OF THE NON-CURRENT…Suits for damages totaling P8,000,000 are pending against Freddy. The company lawyers advised that losses on such suits are not probable. However, company policy has mandated authorization that provision be made in the accounts for any possible loss up to P5,000,000. The suit was settled in 2021 and payment of P7,000,000 was made. Required: Prepare the entry to record the contingent liability
- On October 1, 2020, Washington Chemical was identified as a potentially responsible party by the Environmental Protection Agency. Washington Chemical’s management and its counsel have concluded that it is probable that Washington will be responsible for damages, and a reasonable estimate of these damages is $1,250,000. Washington Chemical’s insurance policy of $2,250,000 has a deductible clause of $125,000. How should Washington Chemical report this information in its financial statements at December 31, 2020?ABC Company is the defendant in a patent infringement suit filed by XYZ Company in 2020. At Dec. 31, 2020, ABC determined that XYZ would probably be successful against ABC for an estimated amount of P5 million. ABC appropriately accrued the loss for the year ended Dec. 31, 2020. On Oct. 31, 2021, ABC Company and XYZ Company agreed to a settlement for a cash payment of P3.8 million and the transfer of ABC Company's patent to XYZ Company. On such date, the patent had a carrying value of P2 million. What would be the effect of this settlement on ABC's profit for the year ended Dec. 31, 2022?Tone Company is the defendant in a lawsuit filed by Witt in 2019 disputing the validity of copyright held by Tone. December 31, 2019, Tone determined that Witt would probably be successful for an estimated amount of P400, 000. Appropriately, a P400, 000 loss was accrued by a charge to income for the year ended December 31, 2019.On December 31, 2020, Tone and Witt agreed to a settlement providing for cash payment of P250, 000 by Tone to Witt, and transfer of Tone’s copyright to Witt. The carrying amount of the copyright on tone’s accounting records was P60, 000 on December 31, 2020. What would be the effect on the settlement on Tone’s income before tax in 2020?
