Blette Company is the defendant in a lawsuit filed by Kale in 2021 disputing the validity of a copyright held by Blette. At December 31, 2021, Blette determined that Kale would probably be successful against Tone for an estimated amount of $420,000. Appropriately, a $420,000 loss was accrued by a charge to income for the year ended December 31, 2021. On December 15, 2022, Blette and Kale agreed to a settlement providing for a cash payment of $270,000 by Blette to Kale, and the transfer of Blette's copyright to Kale. The carrying amount of the copyright on Blette's accounting records was $80,000 at December 15, 2022. What would be the effect of the settlement on Blette's income before income tax in 2022? $150,000 increase $70,000 increase No effect $80,000 decrease

Blette Company is the defendant in a lawsuit filed by Kale in 2021 disputing the validity of a copyright held by Blette. At December 31, 2021, Blette determined that Kale would probably be successful against Tone for an estimated amount of $420,000. Appropriately, a $420,000 loss was accrued by a charge to income for the year ended December 31, 2021. On December 15, 2022, Blette and Kale agreed to a settlement providing for a cash payment of $270,000 by Blette to Kale, and the transfer of Blette's copyright to Kale. The carrying amount of the copyright on Blette's accounting records was $80,000 at December 15, 2022. What would be the effect of the settlement on Blette's income before income tax in 2022? $150,000 increase $70,000 increase No effect $80,000 decrease

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

Blette Company is the defendant in a lawsuit filed by Kale in 2021
disputing the validity of a copyright held by Blette. At December 31,
2021, Blette determined that Kale would probably be successful
against Tone for an estimated amount of $420,000.
Appropriately, a $420,000 loss was accrued by a charge to income
for the year ended December 31, 2021.
On December 15, 2022, Blette and Kale agreed to a settlement
providing for a cash payment of $270,000 by Blette to Kale, and the
transfer of Blette's copyright to Kale.
The carrying amount of the copyright on Blette's accounting records
was $80,000 at December 15, 2022.
What would be the effect of the settlement on Blette's income
before income tax in 2022?
$150,000 increase
$70,000 increase
No effect
$80,000 decrease

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