Star Co had an on-going litigation claim which had been brought against the company for damage to a public road allegedly caused by one of its lorries. At 1 October 20X2, Star Co had disclosed a contingent liability of $120,000. Due to new developments in the court case, the latest correspondance with the solicitors at 30 September 20X3 suggests it is now probable that Star Co will lose and have to pay damages of $150,000. What is the impact of the above provision on the statements of profit or loss for the year ended 30 September 20X3?
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Star Co had an on-going litigation claim which had been brought against the company for damage to a public road allegedly caused by one of its lorries. At 1 October 20X2, Star Co had disclosed a
Due to new developments in the court case, the latest correspondance with the solicitors at 30 September 20X3 suggests it is now probable that Star Co will lose and have to pay damages of $150,000.
What is the impact of the above provision on the statements of profit or loss for the year ended 30 September 20X3?
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- A lawsuit has been filed against Sunland Company for wrongful termination. Sunland's legal counsel had encouraged the company to settle because it is likely they will lose the case. The amount of the loss is estimated to be between $573000 and $1062000. Legal counsel believes that the case could be settled for $864000. Sunland should report O a contingent liability for $864000. O an estimated liability for $573000. O a contingent loss of $1062000. O no loss or liability until the case is settled. Attempts: 0 of 1 used Submit AnswerTender Foot, Inc., is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that it may lose the case. The attorney estimated that there is a 50% chance of losing. The attorney estimated that the amount of any payment would be between P500,000 and P800,000 with P500,000 as the best estimate. How much should be recognized as a liability?Constant Company is being sued for P4, 000,000 for an injury caused to a child as a result of alleged negligence while the child was visiting the Constant Company plant in March 2018. The suit was filed in July 2018. Constant’s lawyer states that it is probable that Constant will lose the suit and be found liable for a judgement costing anywhere from P400, 000 to P2, 000,000. However the lawyer states that the most probable judgement is P1, 000,000. Instructions:How should Constant report the suit in its 2018 financial statements. Discuss the rationale for your answer. Include in your disclosures, if any, that should be made in Constant’s financial statements
- ABC Inc. has is being sued by a customer. The plaintiff (customer) claims $50,000 for product deficiencies. The controller discussed the claim with legal counsel and the lawyer notes that the company is likely to lose the suit with an estimated payout of $50,000. The controller has identified this as a contingent loss (liability) and has accrued it in the financial statements and prepared the note disclosure. The financial statement note disclosure states the following: "During the year, ABC Inc. received a claim for an alleged product deficiency. ABC Inc. is defending the action however legal advice at this time indicated that is likely the claim could result in a loss for ABC İnc." ABC Inc. reports under ASPE. Required: a) Provide the path to the appropriate reference in the Handbook assuming the entity follows ASPE. b) Indicate what is missing from the note disclosure, if anything, for ABC Inc.Swell Company has a lawsuit pending from a customer claiming damages of $100,000. Swell’s attorney advises that the likelihood the customer will win is remote. GAAP requires at a minimum that this contingent liability be disclosed in the footnotes. disclosed in the footnotes, with ranges of the potential loss. recorded as a journal entry, as well as disclosed in the footnotes. No disclosure is required.Pitchfork Company is being sued by a competitor in a lawsuit alleging patent infringement. Pitchfork's lawyers state that it is possible Pitchfork will lose the suit and be found liable for a judgment costing anywhere from $1,800,000 to $9,000,000. However, the lawyers state that no one estimate is more likely. As a result of the above information, Pitchforks should report: a contingent liability in the amount of $5,400,000, representing the average amount within the range of damages, on its Balance Sheet and disclose an additional contingency of up to $3,600,000 in the notes to the Balance Sheet. a contingent liability in the amount of $1,800,000 on its Balance Sheet and disclose an additional contingency of up to $7,200,000 in the notes to the Balance Sheet. a contingent liability in the amount of $5,400,000 on its Balance Sheet, but not disclose any additional contingency. O a possible contingency of between $1,800,000 and $9,000,000 only in the notes of the 10K.
- Fresh Limited, a manufacturer of toothpaste, was taken to court over alleged defamation charges when the company accused a rival toothpaste manufacturer of fraud. Before year end (31 December 2018), the lawyer of Fresh Limited advised that, although losing the case was unlikely, legal fees and settlement costs could amount to $ 900 000 in the event that the court case was lost. On 04 February 2019, the judge presiding over the case ruled that Fresh should pay $ 1 000 000 to the plaintiff as well as pay all of the plaintiff's legal fees, which amounted to $ 180 000. The financial statements had not yet been authorized for issue at the time of the court ruling. Required: Discuss how this information should be treated in the financial statements of Fresh Limited for the year ended 31 December 2018GINGERBREAD Company is involved in a litigation regarding a faulty product sold in a prior year. The entity has consulted with lawyer and determined that there is a 50% chance of losing. The lawyer estimated that the amount of any payment would be between ₱500,000 to ₱800,000 with ₱500,000 as the best estimate. What is the required journal entry as a result of this litigation? * a. No journal entry is required b. Debit Litigation expense and credit Litigation liability for ₱ 500,000 c. Debit Litigation expense and credit Litigation liability for ₱ 250,000 d. Debit Litigation expense and credit Litigation liability for ₱ 650,000Cline Inc. prepares its financial statements according to International Accounting Standards (IFRS). It recently concluded that it will lose a lawsuit, and that it will pay a range of damages falling somewhere between $10 million and $20 million. Cline should accrue a liability in the amount of. a. $0, as no specific amount is probable to be incurred. b. $10 million, the lower end of the range of probable amounts. c. $15 million, the expected value of the amount to be paid. d. $20 million, the upper end of the range of probable amounts.
- Gallardo Co. is involved in a lawsuit as a result of an accident that took place September 5, 2022. The lawsuit was filed on November 1, 2022, and claims damages of $1,000,000. At December 31, 2022, Gallardo’s attorneys feel it is remote that Gallardo will lose the lawsuit. How should the company account for the effects of the lawsuit? Assume instead that at December 31, 2022, Gallardo’s attorneys feel it is probable that Gallardo will lose the lawsuit and be required to pay $1,000,000. How should the company account for this lawsuit? Assume instead that at December 31, 2022, Gallardo’s attorneys feel it is reasonably possible that Gallardo could lose the lawsuit and be required to pay $1,000,000. How should the company account for this lawsuit? Prepare the current liabilities section of the balance sheet.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 $150,000In August 2021, a company's worker was injured in the factory in an accident partially the result of his own negligence. The worker has sued the company for P800,000. The company's counsel believes it is possible but not probable that the outcome of the suit will be unfavorable, and that the settlement would cost the company from P250,000 to P500,000. At year-end, the company should A. disclose the existence of a contingent liability with a range of P250,000 to P500.000. B. disclose the existence of a contingent liability for P375,000. C. record a liability of P375.000. D. do nothing. A suit for breach of contract seeking damages of P2,400,000 was filed by an author against a company on October 4, 2021. The company's legal counsel believed that an unfavorable outcome is probable. A reasonable estimate of the award to the plaintiff is between P600,000 and P1,800,000. No amount within this range is a better estimate of potential damages than any other amount. At yearend, the company…