Explain whether the potential damages receivable for Company A would meet the definition and recognition criteria of an asset, applying the principles in the Proposed Framework (2018 Conceptual Framework
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A: Formulas:
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Q: 2018 Conceptual Framework
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- a b Weaver Company is being sued by a former employee, Weaver believes that there is a remote chance that the employee will win. The employee suing Weaver for damages of $40,000 Gulf Refinery had a gas explosion on one of its oil rigsGulf believes it is likely that it will have to pay environmental clean-up costs and damages in the future due to the gas explosion. Gulf cannot estimate the amount of the damages Lawson Enterprises estimates that it will have to pay $75,000 in warranty repairs next yearQUESTION 3 On June 30, 2020, Duts discovered that it had been manufacturing a product illegally since this product happened to be a patented product for which it did not have the necessary rights., Duts immediately shut down its factory and hired a firm of lawyers to act on its behalf in the acquisition of the necessary rights to manufacture this patented product. Legal fees of PhP 50 000 were incurred during July 2020. The legal process was finalized on July 31, 2020, when Bee was then required to pay PhP 800 000 to purchase the rights, including PhP 80 000 in refundable VAT. During the July factory shut-down: averhead costs of PhP 40 000 were incurred; and significant market share was lost with the result that Bee's total sales over August and September was PhP 20 000 but its expenses were PhP 50 000, resulting in a loss of PhP 30 000. To increase market share, Bee spent an extra PhP 25 000 aggressively marketing their product. This marketing campaign was successful, resulting in…C has initiated a lawsuit against Agency A for recovery of damages when accidentally one of the vehicles owned by the agency collided with the car then driven by C. The Chief Legal Counsel of the Agency estimates from experience that at December 2015, the entity has a 60% chance of winning the lawsuit and thereby avoiding the payment of damages. Furthermore, the counsel estimates that the agency has 20% chance of being ordered to pay C damages of P100,000 and a 20% chance of being ordered to pay C damages of P10,000. . State whether a contingent liability or contingent asset exists. Explain your answers by stating the criteria of your answers below
- 3) The client purchased raw material that was received just before year-end. The purchase was recorded based on its estimated value. The invoice was not received until February 5, 2021, and the cost was substantially different than was estimated4) On February 15, 2021, the civil court decided that Client Company must pay compensation loss due to defect product sold to their customer. lawsuits started in court since June 20205) On February 20, 2021, a major of client customer which has large amount of outstanding A/R suddenly fill for bankruptcy6) On April 1, 2021 fire rage accident destroy client warehouse and the loss were materialQuestions:a. Indicate type 1 subsequent event, type 2 subsequent event, or not subsequent event. What kinds of action, client need to do? Adjust, disclose, or no need to do adjust/disclose for every point form 1) to 6). Provide the reason why it should be adjusted or disclose or neither. (30%)b. What effect on auditors’ independent report if client refused…C has initiated a lawsuit against Agency A for recovery of damages when accidentally one of the vehicles owned by the agency collided with the car then driven by C. The Chief Legal Counsel of the Agency estimates from experience that at December 2015, the entity has a 60% chance of winning the lawsuit and thereby avoiding the payment of damages. Furthermore, the counsel estimates that the agency has 20% chance of being ordered to pay C damages of P100,000 and a 20% chance of being ordered to pay C damages of P10,00 Use the facts given in No. 1, but this time assumes that on December 31, 2015, the Chief Legal Counsel of Agency A estimates from past experience that the possibility of losing the case filed by C is remote. -State whether a contingent liability or contingent asset exists.-Explain your answers by stating the criteria of your answers below.Machine Corp. has several pending lawsuits against its company. Review each situation: A. A pending lawsuit, claiming $120,000 in damages, is considered likely to favor the plaintiff and can be reasonably estimated. B. Machine Corp. believes there might be other potential lawsuits about this faulty machinery, but this is unlikely to occur. C. A claimant sues Machine Corp. for damages, from a dishonored service contract agreement; the plaintiff will likely win the case but damages cannot be reasonably estimated. D. Machine Corp. believes a customer will win a lawsuit it filed, but the outcome is not likely and is not remote. It is possible the customer will win. 1 and 2. Which of the above situations require recognition in the financial statements and which require note disclosure only? a. A must be recognized and requires note disclosure; C and D require note disclosure only. b. All four cases require note disclosure only. c. A, C, and D must be recognized; B requires note…
- For each of the independent situations below indicate the appropriate accounting treatment and note disclosure. Question 4 options: A judge has found the company to be liable for an amount of $400,000 for copyright infringement. The company's lawyers feel that an appeal is unlikely to succeed. The company is being sued as a result of selling a product that made its customers sick. Legal counsel believes the lawsuit will be successful but is unable to estimate the amount of damages the company will have to pay. The company is being sued for patent infringement. Legal counsel believes that the claim is frivolous and that the likelihood of a successful lawsuit is remote. A customer fell on ice outside the company's store. Legal counsel feels that it is only thirty percent likely that a lawsuit will be successful. 1. Record a liability and disclose the situation in the notes. 2. Do not…As a result of an allegedly defective equipment causing harm to an employee, an entity is facing a lawsuit requesting damages. The entity's legal counsel estimates that there is an approximately 60% possibility that the entity will lose the case and that it will have to pay an amount between $100,000 and $200,000 with no amount within such range being more likely than any other amount in the range. How much should the entity record as a contingent loss, if any? (Select the best answer.) a. O $0 b. $60,000 c. O $100,000 d. O $150,0001 In November 2019, Manly Ltd, a manufacturer of heating systems, was taken to court by one of its competitors, Heating Ltd, under the Competition and Consumer Act 2010(Cth). Heating alleged that Manly sought to enter into exclusive agreements with several retailers that they would only stock Manley’s products. While manly incurred $240000 in legal costs in defending the action, the case was settled out of court. The terms of the agreement on 20 February 2020 provided that Manly would pay Heating $$500,000 immediately, and an amount equal to 3% of profits over the next two years. For 2018/2019 the profit was estimated to be $660,000 and the year after $780,000. Advise Manly on the deductibility of this expenditure. Make sure you include the relevant sections of the legislation
- Machine Corp. has several pending lawsuits against its company. Review each situation: A. A pending lawsuit, claiming $117,000 in damages, is considered likely to favor the plaintiff and can be reasonably estimated. B. Machine Corp. believes there might be other potential lawsuits about this faulty machinery, but this is unlikely to occur. C. A claimant sues Machine Corp. for damages, from a dishonored service contract agreement; the plaintiff will likely win the case but damages cannot be reasonably estimated. D. Machine Corp. believes a customer will win a lawsuit it filed, but the outcome is not likely and is not remote. It is possible the customer will win. 1 and 2. Which of the above situations require recognition in the financial statements and which require note disclosure only? a. A must be recognized and requires note disclosure; C and D require note disclosure only. b. All four cases require note disclosure only. c. A, C, and D must be recognized; B requires note…ProWasher is the defendant in a patent infringement lawsuit filed by Sue Case over ProWasher’s use of a hydraulic compressor in several of its products. Anna Turney claims that, if the suit goes against ProWasher, the loss may be as much as $5 million. It is more likely than not that ProWasher will have to pay some amount on the settlement. Although the exact amount is not known, the lawyer has been able to assign probabilities and expected payment amounts as follows (based on Statistics - probability distributions): 20% probability that the settlement will be $5 million, 35% probability that the settlement required will be $3 million, and 45% that no settlement will be required. How much is the patent liability?ProWasher is the defendant in a patent infringement lawsuit filed by Sue Case over ProWasher’s use of a hydraulic compressor in several of its products. Anna Turney claims that, if the suit goes against ProWasher, the loss may be as much as $5 million. It is more likely than not that ProWasher will have to pay some amount on the settlement. Although the exact amount is not known, the lawyer has been able to assign probabilities and expected payment amounts as follows (based on Statistics - probability distributions): 20% probability that the settlement will be $5 million, 35% probability that the settlement required will be $3 million, and 45% that no settlement will be required. How much is the liability and explain