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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- 6. Buwis Buhay Incorporated had several outstanding obligations on December 31, 2019. The brief descriptions listed below can be ascertained from these liabilities. What is the correct treatment for the court case that happened on June 2019? • in June 2019, Buwis Buhay was involved in a court case amounting to P10,000,000. The attorney assessed that it is probable that the company will win the case with P4,500,000 as the best estimate of the reward. • In August 2019, Baguio City brought an action against the company for polluting the surrounding rivers with its waste products costing P5,000,000. It is probable that Baguio City will be successful but the amount of damages Buwis Buhay might have to pay is not to exceed P2,500,000. •In December 2019, another litigation case amounting to P20,000,000 was filed against Buwis Buhay for injuring pedestrians due to its renovation projects within the premise. This court case is seen to have remote likelihood of occurrence because the…During the year 2021, Bong Company was involved in a lawsuit. Bong was sued by an employee for illegal dismissal from employment. Legal proceedings started and owing to the developments in the case, as of December 31, 2021, Bong’s lawyer believes that an unfavorable outcome was probable and a reasonable estimate of damages was P5,000,000 but could be as much as P6,500,000. Before the 2021 financial statements were issued, the employee accepted a cash settlement of P6,000,000 from Bong. In its December 31, 2021 financial statements issued in March 2022, what amount of liability would Bong have reported?Gatsby, Inc. owed $500,000 on account for inventory purchased on November 1, 2020. The company's fiscal year ends on December 31. Gatsby was unable to pay the amount owed by February 1, 2021 due date because of financial difficulties experienced in early 2021. On February 1, 2021, it signed a $500,000, 10% interest- bearing note. This note was repaid with interest on September 1, 2021. How much interest should Gasby recognize on September 1, 2021 (enter your answer in whole dollars, no comma or dollar sign)?
- On July 1, 2020, Ben entered a litigation case with Yona over unauthorized use of Yona’s latest technology. On September 1, 2020, Ben’s lawyers estimated that there is a 70% probability that Ben will lose in the next hearing that will be held on February 2, 2021. Ben stood to pay a maximum of $1,000,000 penalty by the court if proven guilty. Instructions: a. Why should Ben report this case on its Statement of financial position? b. How is the impact of this litigation Ben’s financial statement for 31 December 2020? c. If, October 15, 2020, the legal team finds new evidence for the claim against Ben, and revise the likelihood of Ben winning the case to 70%, how should this be shown in the financial statements?At December 31,2020, a firm is evaluating a contingent liability as part of their annual financial reporting. They consider the loss probable and expect to pay $400,000. One year later, the case is still on-going, and the firm expects that the loss is still probable and the most likely amount is $500,000. At December 31, 2021, the firm updates their estimate. The court case settles on May 31, 2022. The firm pays $425,000 to settle the case. What effect does the contingent liability have on net income in each year, respectively? O 2020: Reduce $400,000, 2021: No Effect, 2022: No Effect O 2020: Reduce $400,000, 2021: Reduce $100,000, 2022: Increase $25,000 O 2020: Reduce $400,000, 2021: Reduce $100,000, 2022: Increase $75,000 O 2020: No Effect, 2021: No Effect, 2022: No Effect O 2020: Reduce $400,000, 2021: Reduce $100,000, 2022: No EffectOn April 1, 2024, Washtenaw Corporation realizes that one of its main suppliers is having difficulty meeting delivery schedules, which is hurting Washtenaw's business. The supplier explains that it has a temporary lack of funds that is slowing its production cycle. Washtenaw agrees to lend $480,000 to its supplier using a 12-month, 12% note. Required: Record the following transactions for Washtenaw Corporation: 1. The loan of $480,000 and acceptance of the note receivable on April 1, 2024. 2. The adjusting entry for accrued interest on December 31, 2024. 3. Cash collection of the note and interest on April 1, 2025. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet 1 Record the loan of $480,000 and acceptance of the note receivable on April 1, 2024. 2 Note: Enter debits before credits. Date April 01, 2024 Record entry Credit > View general journal
- Superior Skateboard Company, located in Ontario, is preparing adjusting entries at December 31, 2023. An analysis reveals the following: During December, Superior sold 6, 600 skateboards that carry a 60 - day warranty. The skateboard sales totalled $391,000. The company expects 7% of the skateboards will need repair under warranty and it estimates that the average repair cost per unit will be $39. A disgruntled employee is suing the company. Legal advisers believe that it is probable that Superior will have to pay damages, the amount of which cannot be reasonably estimated. Superior needs to record previously unrecorded cash sales of $2, 110,000 (cost of sales 60%) plus applicable HST. Superior recognizes that $ 96,000 of $161,000 received in advance for skateboards has now been earned. Required: Prepare any required adjusting entries at December 31, 2023, for each of the above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account…On November 1, 2017, Blessy company was awarded a judgement of 1,500,000 in connection with a lawsuit. The decision is being appealed by the defendant and it is expected that the appeal process will be completed by the end of 2018. The attorney believed that it is highly probable that an award will be upheld on appeal but the judgement may be reduced by 40%. What amount should be reported as a receivable on December 31, 2017?Dinoco Petroleum faces three potential contingency situations, described below. Dinoco's fiscal year ends December 31, 2024, and it issues its 2024 financial statements on March 15, 2025. 1. In the initial trial in October, Dinoco lost a $126 million lawsuit resulting from a dispute with a supplier. Although Dinoco feels it is probable it will have to pay the full amount, the case is under appeal at the end of the year. Dinoco does not expect the case to have a material adverse effect on the company. 2. In November 2023, the state of Texas filed suit against Dinoco, seeking civil penalties and injunctive relief for violations of environmental laws regulating hazardous waste. On January 12, 2025, Dinoco reached a settlement with state authorities. Based upon discussions with legal counsel, it is probable Dinoco will require $146 million to cover the cost of violations. 3. Dinoco is the plaintiff in a $260 million lawsuit filed against a customer for damages due to lost profits from…
- During 2021, Tartarus Company signed a noncancellable contract to purchase 500 sacks of rice at P900 per sack with delivery to be made in 2022. On December 31, 2021, the price of rice had fallen to P850 per sack. On May 9, 2022, Tartarus Company accepts delivery of rice when the price is P880 per sack. What amount of recovery of loss on purchase commitment should Tartarus recognize on May 9, 2022VS Co. has experienced tough competition, leading it to seek concessions from its employees in the company's pension plan. In exchange for promises to avoid layoffs and wage cuts, the employees agreed to receive lower pension benefits in the future. As a result, VS Co. amended its pension plan on January 1, 2019, and recorded negative past service cost of €125,000. The average period to vesting for the benefits affected by this plan is 5 years. Current service cost for 2019 is €26,000. Interest expense is €9,000, and interest revenue is €2,500. Actual return on assets in 2019 is €1,500. Compute pension expense for VS Co. in 2019. O a. (€92,500) O b. (€99,000) €99,000 O d. €92,500On May 3, 2020, Vaughn Company consigned 90freezers, costing $470each, to Remmers Company. The cost of shipping the freezers amounted to $870and was paid by Vaughn Company. On December 30, 2020, a report was received from the consignee, indicating that45freezers had been sold for $750each. Remittance was made by the consignee for the amount due after deducting a commission of6%, advertising of $180, and total installation costs of $310on the freezers sold. (Round answers to O decimal places, e.g. 5,275.) (a) Compute the inventory value of the units unsold in the hands of the consignee. Inventory value $ (b) Compute the profit for the consignor for the units sold. Profit on consignment sales $ (c) Compute the amount of cash that will be remitted by the consignee. Remittance from consignee $
