Reeves Company filed suit against Higgins, Incorporated, seeking damages for copyright violations. Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of $150,000 to $250,000, with all amounts in the range considered equally likely. How should Higgins report this litigation? Multiple Choice О As a liability for $150,000 with disclosure of the range As a liability for $200,000 with disclosure of the range In a disclosure only, no liability is reported

Reeves Company filed suit against Higgins, Incorporated, seeking damages for copyright violations. Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of $150,000 to $250,000, with all amounts in the range considered equally likely. How should Higgins report this litigation? Multiple Choice О As a liability for $150,000 with disclosure of the range As a liability for $200,000 with disclosure of the range In a disclosure only, no liability is reported

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 6PA: Machine Corp. has several pending lawsuits against its company. Review each situation and (1)...

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Machine Corp. has several pending lawsuits against its company. Review each situation and (1) determine the treatment for each situation as probable and estimable, probable and inestimable, reasonably possible, or remote; (2) determine what, if any, recognition or note disclosure is required; and (3) prepare any journal entries required to recognize a contingent liability. A. A pending lawsuit, claiming $100,000 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.
Reeves Co. filed suit against Higgins, Inc., seeking damages for copyright violations. Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of $100,000 to $200,000, with all amounts in the range considered equally likely. How should Higgins report this litigation? Multiple Choice As a liability for $100,000 with disclosure of the range. As a liability for $150,000 with disclosure of the range. As a liability for $200,000 with disclosure of the range. As a disclosure only. No liability is reported.
Reeves Co. filed suit against Higgins, Inc., seeking damages for copyright violations. Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of $170,000 to $270,000, with all amounts in the range considered equally likely. How should Higgins report this litigation? Multiple Choice As a liability for $170,000 with disclosure of the range. As a disclosure only. No liability is reported. As a liability for $270,000 with disclosure of the range. As a liability for $220,000 with disclosure of the range.
Smith Co. filed suit against Western, Inc., seeking damages for patent infringement. Western’s legal counsel believes it is probable that Western will have to pay an estimated amount in the range of $75,000 to $175,000, with all amounts in the range considered equally likely. How should Western report this litigation?a. As a liability for $75,000 with disclosure of the range. b. As a liability for $125,000 with disclosure of the range. c. As a liability for $175,000 with disclosure of the range. d. As a disclosure only. No liability is reported.
Tone Company is the defendant in a lawsuit filed by Witt in 2011 disputing the validity of copyright held by Tone. On December 31, 2011, Tone determined that Witt would probably be successful against Tone 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, 2011. On December 31, 2012, 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, 2012. What would be the effect of the settlement on Tone's income before tax in 2012? a. 150,000 increase b. 60,000 decrease c. 90,000 increase d. 90,000 decrease
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?
Tang company is the defendant in a lawsuit filed by wong in 2019 disputing the validity of copyright held by tang. In December 31, 2019, tang determined that wong would probably be successful for an estimated amount of P600,000. Appropriately, a P600,000 loss was accrued by a charge to income for the year ended December 31, 2019. On December 31, 2020, tang and wong agreed to a settlement providing for cash payment of P375,000 and transfer to tang's copyright to wong. The carrying amount of the copyright on tang’s accounting records was P90,000 on December 31, 2021. What would be the increased in tang’s income before tax in 2020 due to this settlement?answer this with detailed solution.
Company A is suing Company B for $500 000 in relation to a breach of copyright. Company B produced designer clothes identical to those for which Company A holds legal rights, without permission and without paying Company A for permission to use the designs. Legal experts have advised Company A that it has a strong case and that there is a 50% likelihood that Company B will be required to pay damages, although these are estimated at $400 000. 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).
Smith Co. filed suit against Western, Inc., seeking damages for patent infringement. Smith’s legal counsel believes it is probable that Western will have to pay $125,000, although no final settlement has yet been reached. How should Smith report this litigation? a. As an asset for $125,000.b. As a gain for $125,000.c. As both an asset and a gain for $125,000.d. No asset or gain is reported.
In the same year, the entity is a defendant in a lawsuit disputing the validity of copyright held by the entity. On December 31, 2019 , the entity determined that the plaintiff would probably be a successful against the entity for an estimated amount of P2,000,000. Appropriately, a P2,000,000 loss was accrued by a charge to income for the current year. On December 31, 2019, the entity and plaintiff agreed to a settlement providing for cash payment of P1,250,000 by the entity and transfer of the copyright to plaintiff. The carrying amount of the copyright was P250,000. What should be the effect of the settlement of the copyright case on Davao Company’s income before tax in 2020? 300,000 increase 750,000 decrease 250,000 decrease 750,000 increase 500,000 increase
On December 31, 2014, SBMA Inc. was a defendant in three litigations provided below: The first case is about environmental violation and the legal counsel determined that it isreasonably possible that SBMA will become liable in a the range of P4,000,000 to P6,000,000. The second case is about illegal dismissal and the legal counsel determined that it is remotethat SBMA will become liable in a reliable estimate of P3,000,000. The third case is about patent infringement and the legal counsel determined that it is probablethat SBMA will become liable in the following expected value:P2,000,000 - 50%P5,000,000 - 30%P10,000,000 - 20%Required: Determine the following for the year ended December 31, 2014:__________1. Accrued Provision on December 31, 2014__________2. Disclosed Contingent Liability on December 31, 2014
Sweet Company recently was sued by a competitor for patent infringement. Attorneys have determined that it is probable that Sweet will lose the case and that a reasonable estimate of damages to be paid by Sweet is $315,000. In light of this case, Sweet is considering establishing a $103,400 self-insurance allowance. What entry, if any, should Sweet record to recognize this loss contingency?