During 2021, Libya Company is the defendant in a breach of patent lawsuit. The lawyers believed there is an 80% chance that the court will not dismiss the case and the entity will incur outflow of benefits. If the court rules in favor of the claimant, the lawyers believed that there is a 60% chance that the entity will be required to pay damages of P2,000,000 and a 40% chance that the entity will be required to pay damages of P1,000,000. Other amounts of damages are unlikely. There is no indication that the claimant will settle out of court. The court is expected to rule in late December 2022. An 8% risk adjustment factor to the cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. The appropriate discount rate is 12%. The PV of 1 at 12% for one period is .89. 1. What amount should be recognized as undiscounted cash flows for the provision? a. 1,382,400 b. 1,280,000 c. 1,036,800 d. 1,620,000 : What amount should be reported as provision for lawsuit on December 31, 2021? a. 1,139,200 b. 1,335,000 c. 1,230,336 d. 922,752

During 2021, Libya Company is the defendant in a breach of patent lawsuit. The lawyers believed there is an 80% chance that the court will not dismiss the case and the entity will incur outflow of benefits. If the court rules in favor of the claimant, the lawyers believed that there is a 60% chance that the entity will be required to pay damages of P2,000,000 and a 40% chance that the entity will be required to pay damages of P1,000,000. Other amounts of damages are unlikely. There is no indication that the claimant will settle out of court. The court is expected to rule in late December 2022. An 8% risk adjustment factor to the cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. The appropriate discount rate is 12%. The PV of 1 at 12% for one period is .89. 1. What amount should be recognized as undiscounted cash flows for the provision? a. 1,382,400 b. 1,280,000 c. 1,036,800 d. 1,620,000 : What amount should be reported as provision for lawsuit on December 31, 2021? a. 1,139,200 b. 1,335,000 c. 1,230,336 d. 922,752

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Toy Company provided the following facts regarding pending litigation on December 31, 2020: • The entity is defending against a first lawsuit and believes there is a 51% chance it will lose in court. The entity estimates that damages will be P1,000,000. • The entity is defending against a second lawsuit for which management believes it is virtually certain to lose in court. •If it loses the lawsuit, management estimates damages will fall somewhere in the range of P3,000,000 to P5,000,000 with each amount in that range equally likely to occur. • The entity is defending against a third lawsuit but the relevant loss will only occur far into the future. The present values of the endpoints of the range are P1,500,000 and P2,500,000. The management believes the effects of time value of money on these amounts are material but also believes the timing of these amounts is uncertain. The entity is defending against a fourth lawsuit and believes there is only a 25% chance it will lose in court.…
Voi company provided the following facts regarding pending litigation on December 31,2020 1. The entity is defending against a first lawsuit and believe that there is a 51% chance that it will lose in court. The entity estimate that damages amounting to P 1,000,000 2. The entity is defending against a second lawsuit which management believes it is virtually certain to lose in court. If it losses, management estimate damages will amount in between P 3,000,000 to P 5,000,000 3. The entity is defending a third but the relevant loss will incur in the future. The present values of the endpoints of the range are P 1,500,000 and P 2,500,000. The management believes the effect of the time value of money on these amounts are Materials but also believes the timing of these amount are uncertain. 4. The entity is defending against a fourth lawsuit and believes there is only 25% chance it will lose in court.If the entity lose management believes damages will likely be from P 3,000,000 to P…
Toy Company provided the following facts regarding pending litigation on December 31, 2020: • The entity is defending against a first lawsuit and believes there is a 51% chance it will lose in court. The entity estimates that damages will be P1,000,000. • The entity is defending against a second lawsuit for which management believes it is virtually certain to lose in court. •If it loses the lawsuit, management estimates damages will fall somewhere in the range of P3,000,000 to P5,000,000 with each amount in that range equally likely to occur. • The entity is defending against a third lawsuit but the relevant loss will only occur far into the future. The present values of the endpoints of the range are P1,500,000 and P2,500,000. The management believes the effects of time value of money on these amounts are material but also believes the timing of these amounts is uncertain. The entity is defending against a fourth lawsuit and believes there is only a 25% chance it will lose in court.…
An entity is the defendant in a patent infringement lawsuit. The entity's lawyers believe there is a 30% 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 a 20% chance that the entity will be required to pay damages of P800,000 (the amount sought by the claimant) and an 80% chance that the entity will be required to pay damages of P400,000 (the amount that was recently awarded by the same judge in a similar case). Other outcomes are unlikely. The court is expected to rule in late December 20x2. There is no indication that the claimant will settle out of court. A 7% 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 10% per year. How much is the provision for lawsuit at December 31, 20x1? Select the correct…
Iron Man Company provided the following facts regarding pending litigation on December 31, 2020:* The entity is defending against a first lawsuit and believes there is a 51% chance it will lose in court. The entity estimates that damages will be P1,000,000.* The entity is defending against a second lawsuit for which management believes it is virtually certain to lose in court. If it loses the lawsuit, management estimates damages will fall somewhere in the range of P3,000,000 to P5,000,000 with each amount in that range equally likely to occur.* The entity is defending against a third lawsuit but the relevant probable loss will only occur far into the future. The present values of the endpoints of the range are P1,500,000 and P2,500,000. The management believes the effects of time value of money on these amounts are material but also believes the timing of these amounts is uncertain.* The entity is defending against a fourth lawsuit and believes there is only a 25% chance it will lose…
ABC is a defendant in a breach of patent lawsuit. If the court rules in favor of the claimant, the lawyers believe that there is a 60 percent chance that the entity will be required to pay damages of P2 million (them amount sought by the claimant) and a 40 per cent chance that the entity will be required to pay damages of P1 million (the amount that was recently awarded by the same judge in a similar case). Other amounts of damages are unlikely. The court is expected to rule the following year (in late December 2023). There is no indication that the claimant will settle out of court. ABC's lawyers believe there is a probability of very slightly over 50% that ABC will successfully defend the case. A 7 percent risk adjustment factor to the cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An appropriate discount rate is 10 percent per year.What amount of provision must be recorded from the lawsuit as of December 31, 2022?
SME A is a defendant in a breach of patent lawsuit. If the court rules in favor of the claimant, the lawyers believe that there is a 60 percent chance that the entity will be required to pay damages of P2 million (them amount sought by the claimant) and a 40 per cent chance that the entity will be required to pay damages of P1 million (the amount that was recently awarded by the same judge in a similar case). Other amounts of damages are unlikely. The court is expected to rule the following year (in late December 2023). There is no indication that the claimant will settle out of court. SME A's lawyers believe there is a probability of very slightly over 50% that SME A will successfully defend the case. A 7 percent risk adjustment factor to the cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An appropriate discount rate is 10 percent per year.What amount of provision must be recorded from the lawsuit as of December 31, 2022?
During 2014, Odyssey Company is the defendant in a patent infringement lawsuit. The entity's lawyers believe there is a 30% 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 a 20% chance that the entity will be required to pay damages of P200,000 and an 80% chance that the entity will be required to pay damages of P100,000. Other outcomes are unlikely. The court is expected to rule in late December 2015. There is no indication that the claimant will settle out of court. A 7% 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 5% per year. The present value of 1 at 5% for one period is 0.95. What is the measurement of the provision for lawsuit on December 31, 2014?
During 2011, Odyssey Company is the defendant in a patent infringement lawsuit. The entity's lawyers believe there is a 30% 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 a 20% chance that the entity will be required to pay damages of P200,000 and an 80% chance that the entity will be required to pay damages of P100,000. Other outcomes are unlikely. The court is expected to rule in late December 2012. There is no indication that the claimant will settle out of court. A 7% risk adjustment factor to the probability-weighted expected cashflows is considered appropriate to reflect the uncertainties in the cashflow estimates. An appropriate discount rate is 5% per year. The present value of 1 at 5% for one period is 0.95. What is the measurement of the provision for lawsuit? a. 100,000 b. 84,000 c.…
18. During 2011, Odyssey Company is the defendant in a patent infringement lawsuit. The entity's lawyers believe there is a 30% 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 a 20% chance that the entity will be required to pay damages of P200,000 and an 80% chance that the entity will be required to pay damages of P100,000. Other outcomes are unlikely. The court is expected to rule in late December 2012. There is no indication that the claimant will settle out of court. A 7% risk adjustment factor to the probability- weighted expected cashflows is considered appropriate to reflect the uncertainties in the cashflow estimates. An appropriate discount rate is 5% per year. The present value of 1 at 5% for one period is 0.95. What is the measurement of the provision for lawsuit? * a. 100,000 b. 84,000 c. 89,880 O d. 85,386
Use the information for the next two (2) questions. During 2020, Wasp Company is the defendant in a patent infringement lawsuit. The entity's lawyers believe there is a 30% 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 a 20% chance that the entity will be required to pay damages of P200,000 and an 80% chance that the entity will be required to pay damages of P100,000. Other outcomes are unlikely.The court is expected to rule in late December 2022. There is no indication that the claimant will settle out of court.A 7% 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 5% per year. The present value of 1 at 5% for one period is 0.95 and for two periods is 0.91.What is the amount of undiscounted cash flows for the…
During 2022, an entity is the defendant in a patent infringement lawsuit. The lawyers believe that there is a 30% 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 a 20% chance that the entity will be required to pay the damages of P100,000 and 80% chance that the entity will be required to pay damages of P200,000.00. Other outcomes are unlikely.The court is expected to rule in late December 2023. There is no indication that the claimant will settle out of court.A 7% risk adjustment factor to the probability-weighted expected cash flows is considered appropriate to reflect the uncertainties in the cash flow estimate. An appropriate discount rate is 5% per year. The present value of 1 at 5% for one period is 0.95.What is the undiscounted provision before risk adjustment?What amount should be reported as provision for lawsuit on December 31, 2022?