During 2020, Macedonia Company is the defendant in a patent infringement lawsuit. The entity's lawyers believe there is a 40% chance that the court will dismiss the case and the entity will incur no outflow of economic benefits. However, if the court rules in favor of the claimant, the lawyers believe that there is 30% chance that the entity will be required to pay damages of P400,000 and an 70% chance that the entity will be required to pay damages of P350,000. Other outcomes are unlikely. The court is expected to rule in late December 2020. There is no indication that the claimant will settle out of court. A 8% risk adjustment factor to the probability-weighted expected cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An appropriate discount rate is 7% per year. The present value of 1 at 7% for one period is 0.9345. What is the measurement of the provision for lawsuit? Round your final answer to the nearest peso.
During 2020, Macedonia Company is the defendant in a patent infringement lawsuit. The entity's lawyers believe there is a 40% chance that the court will dismiss the case and the entity will incur no outflow of economic benefits. However, if the court rules in favor of the claimant, the lawyers believe that there is 30% chance that the entity will be required to pay damages of P400,000 and an 70% chance that the entity will be required to pay damages of P350,000. Other outcomes are unlikely. The court is expected to rule in late December 2020. There is no indication that the claimant will settle out of court. A 8% risk adjustment factor to the probability-weighted expected cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An appropriate discount rate is 7% per year. The present value of 1 at 7% for one period is 0.9345. What is the measurement of the provision for lawsuit? Round your final answer to the nearest peso.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:During 2020, Macedonia Company is the defendant in a patent infringement lawsuit. The entity's lawyers believe there is a 40% chance that the court will dismiss the
case and the entity will incur no outflow of economic benefits.
However, if the court rules in favor of the claimant, the lawyers believe that there is 30% chance that the entity will be required to pay damages of P400,000 and an 70%
chance that the entity will be required to pay damages of P350,000. Other outcomes are unlikely. The court is expected to rule in late December 2020. There is no
indication that the claimant will settle out of court.
A 8% risk adjustment factor to the probability-weighted expected cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An
appropriate discount rate is 7% per year. The present value of 1 at 7% for one period is 0.9345.
What is the measurement of the provision for lawsuit?
Round your final answer to the nearest peso.
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