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1. During 2021, Thor Company was sued by a competitor for P5,000,000 for infringement of a trademark. Based on the advice of the entity's legal counsel, the entity accrued the sum of P3,000,000 as a provision in the financial statements for the year ended December 31, 2021. Subsequent to the end of the reporting period, on February 15, 2022, the Supreme Court decided in favor of the party alleging infringement of the trademark and ordered the E D2 50 000

1. During 2021, Thor Company was sued by a competitor for P5,000,000 for infringement of a trademark. Based on the advice of the entity's legal counsel, the entity accrued the sum of P3,000,000 as a provision in the financial statements for the year ended December 31, 2021. Subsequent to the end of the reporting period, on February 15, 2022, the Supreme Court decided in favor of the party alleging infringement of the trademark and ordered the E D2 50 000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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1. During 2021, Thor Company was sued by a competitor for P5,000,000 for infringement of a trademark. Based on the advice of the entity's legal counsel, the entity accrued the sum of P3,000,000 as a provişion in the financial statements for the year ended December 31, 2021: Subsequent to the end of the reporting period, on February 15, 2022, the Supreme Court decided in favor of the party alleging infringement of the trademark and ordered the defendant to pay the aggrieved party a sum of P3,500,000. The financial statements were prepared by the entity's management on January 31, 2022, and approved by the board of directors on February 20, 2022. What amount of provision should have been accrued on December 31, 2021? 5,000,000 b. а. 3,000,000 3,500,000 d. с. 2. On November 5, 2021, a Dunn Company truck was in an accident with an auto driven. by Bell. The entity received notice on January 12, 2022 of a lawsuit for P700,000 damages for personal injuries suffered by Bell. The entity's counsel believed it is probable that Bell will be awarded an estimated amount in the range between P200,000 and P500,000. The possible outcomes are equally likely. The accounting year ends on December 31 and the 2021 financial statements were issued on March 31, 2022. What amount of provision should be accrued on December 31, 2021? а. b. 200,000 c. 500,000 d. 350,000 100
Transcribed Image Text:1. During 2021, Thor Company was sued by a competitor for P5,000,000 for infringement of a trademark. Based on the advice of the entity's legal counsel, the entity accrued the sum of P3,000,000 as a provişion in the financial statements for the year ended December 31, 2021: Subsequent to the end of the reporting period, on February 15, 2022, the Supreme Court decided in favor of the party alleging infringement of the trademark and ordered the defendant to pay the aggrieved party a sum of P3,500,000. The financial statements were prepared by the entity's management on January 31, 2022, and approved by the board of directors on February 20, 2022. What amount of provision should have been accrued on December 31, 2021? 5,000,000 b. а. 3,000,000 3,500,000 d. с. 2. On November 5, 2021, a Dunn Company truck was in an accident with an auto driven. by Bell. The entity received notice on January 12, 2022 of a lawsuit for P700,000 damages for personal injuries suffered by Bell. The entity's counsel believed it is probable that Bell will be awarded an estimated amount in the range between P200,000 and P500,000. The possible outcomes are equally likely. The accounting year ends on December 31 and the 2021 financial statements were issued on March 31, 2022. What amount of provision should be accrued on December 31, 2021? а. b. 200,000 c. 500,000 d. 350,000 100
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