During 2023, Lowry Company was used by a competitor for P5,000,000 infringement suit of a trademark. Based on the legal counsel's advice, Lowery accrued the sum of P3,000,000 as a provision. On February 15, 2024, the Supreme Court decided in favor of the party alleging the infringement and ordered the defendant to pay the aggrieved party a sum of P3,500,000. The financial statements of Lowry were approved by the BOD for issue on Februar 20, 2024. What amount should the Company accrue as provision for the year ended December 31, 2023?

During 2023, Lowry Company was used by a competitor for P5,000,000 infringement suit of a trademark. Based on the legal counsel's advice, Lowery accrued the sum of P3,000,000 as a provision. On February 15, 2024, the Supreme Court decided in favor of the party alleging the infringement and ordered the defendant to pay the aggrieved party a sum of P3,500,000. The financial statements of Lowry were approved by the BOD for issue on Februar 20, 2024. What amount should the Company accrue as provision for the year ended December 31, 2023?

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

Garth, Corporation and Waite Inc. are privately held entities with a September 30 fiscal year end. Garth Corporation and Waite Inc. (a competitor of Garth) have been engaged in long-standing litigation over trademark infringement matter. The following is a summary of specific events that have taken place related to this matter: In May, 2020, Garth filed a claim against Waite for trademark infringement. The case is scheduled to be heard by a judge in December 2021. For the year ended September 30th, 2021, attorneys for Waite advised that they strongly believed that Waite would not be successful in the case. The attorneys stated that this loss was probable and represented that the estimate of the settlement would be in the range of $5 million to $10 million. Garth’s attorneys have advised Garth Corporation that they also agree with Waite’s attorneys’ assessment of the likelihood of their success and the amount of the probable settlement. Based upon this advice from the attorneys…
The Commonwealth of Virginia filed suit in October 2022 against Northern Timber Corporation, seeking civil penalties and injunctive relief for violations of environmental laws regulating forest conservation. When the financial statements were issued in 2023, Northern had not reached a settlement with state authorities, but legal counsel advised Northern Timber that it was probable the ultimate settlement would be $1,100,000 in penalties. The following entry was recorded: General Journal Debit Credit Loss-litigation 1, 100, 000 Liability-litigation 1, 100, 000 Late in 2024, a settlement was reached with state authorities to pay a total of $680,000 to cover the cost of violations. Required: Prepare any journal entry(s) related to the change. Is Northern required to revise prior years' financial statements as a result of the change? Is Northern required to provide a disclosure note to report the change?
11
On January 2, 2023, Blossom Corp. bought a trademark from Cullumber Inc. for $117000. An independent research company estimated that the remaining useful life of the trademark was 25 years. At this time, the trademark's net book value in Cullumber's records was $174000. Because the trademark had a demonstrated limited life beyond 25 years, Blossom decided to amortize the trademark over the maximum period, straight-line with no residual. In Blossom's (calendar) 2023 income statement, what amount should be reported as amortization expense for this trademark? O $6492 O $6960 O $4680 O $5850
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern's fiscal year ends December 31, and the 2024 financial statements are issued on March 15, 2025, a. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2025, judgment was rendered against Eastern in the amount of $118 million plus interest, a total of $133 million. Eastern plans to appeal the judgment and is unable to predict its outcome though it is not expected to have a material adverse effect on the company. b. In November 2023, the State of Nevada filed suit against Eastern, seeking civil penalties and injunctive relief for violations of environmental laws regulating hazardous waste. On January 12, 2025, Eastern reached a settlement with state authorities. Based upon discussions with legal counsel, the Company feels it is probable that $151 million will be required to cover the cost of violations. Eastern believes that…
Cocoa Corporation is preparing its December 31, 2023 financial statements. On March 1, the company settled a lawsuit for which it had accrued a contingent liability (loss) of $1,600,000. The amount of the settlement was $1,750,000. The financial statements were issued on March 10, 2024. Which of the following is correct regarding the settlement of the lawsuit? Question 9Answer a. The additional loss of $150,000 will be reported in the 2024 financial statements. b. No contingent liability will be reported on the 2023 Balance Sheet since the suit has been settled. c. This is not a recognized subsequent event because this information about the settlement was not known at year-end. Therefore, no adjustment is required. d. Cocoa should make an adjusting entry to adjust the estimated loss to the actual amount. Net income for 2023 will decrease by $150,000 (ignoring taxes).
In May 2019, Colt Company filed suit against Johnson Company seeking P1,900,000 damages for patent infringement. A court verdict in November 2019 awarded Colt Company P1,500,000 in damages, but Johnson Company's appeal is not expected to be decided before 2020. The legal counsel believed it is probable that Colt Company will be successful against Johnson Company for an estimated amount in the range between P800,000 and P1,100,000, with P1,000,000 considered the most likely amount. What amount should Colt Company record as income from the lawsuit for the December 31, 2019? year ended
3. Paris paid Cherry $333,333 on 12/31/2020 for the exclusive right to market a particular product using the Cherry Co name and logo in promotional material. The franchise follows the rules of Going Concern. Paris also spent $600,000 on 12/31/2020 in developing a new manufacturing process. Its application for a patent is submitted. Paris believes it will be successful In January of 2021 Paris application for a patent was granted. Legal and registrations costs incurred were $ 210,000. The patent runs for 20 years. But the manufacturing process will only be useful to Paris for 10 years What is the impact on net income related to the $210,000 of costs for the patent?
On January 1, 2020, Tom Co (A seller-lessee) sells a building to MacCo (an unrelated buyerlessor) for cash of $2,000,000. The fair value of the building at that time is $1,800,000; the carrying amount immediately before the transaction is $1,000,000. At the same time, TomCo enters into a contract with MacCo for the right to use the building for 19 years, with annual payments of $120,000 payable at the end of each year. The interest rate implicit in the lease is 4.5%, which results in a present value of the annual payments of $1,459,200. The transfer of the asset to MacCo has been assessed as meeting the definition of a sale under PSAK 72. Discuss the implication of the transactions and state the journal entries on January 1, 2020
Tran Technologies licenses its functional intellectual property to Lyon Industries. Terms of the arrangement require Lyon to pay Tran $590,000 on April 1, 2024, when Lyon first obtains access to Tran’s intellectual property, and then in the future to pay Tran a royalty of 5% of future sales of products that utilize that intellectual property. Tran anticipates receiving sales-based royalties of $1,090,000 during 2024 and $1,590,000 per year for the years 2025 to 2029. Assume Tran accounts for the Lyon license as a right of use, because Tran’s actions subsequent to April 1, 2024, will not affect the benefits that Lyon receives from access to Tran’s intellectual property. Required: Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org) and select Basic View for free access. Identify the specific nine-digit Codification citation (XXX-XX-XX-XX) for accounting for variable consideration arising from sales-based royalties on licenses of intellectual property,…
Swifty Company incurred $551000 of research and development cost in its laboratory to develop a patent granted on January 1, 2027. On July 31, 2027, Swifty paid $83600 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31, 2027, is
On January 1, 2021, DONNER Corporation purchased investment securities for ₱1,200,000. The securities are classified as trading. By December 31, 2021, the securities had a fair value of ₱1,680,000 but had not yet been sold. The company recognized a ₱320,000 restructuring charge during the year. The restructuring charge is composed of an impairment write-down on a manufacturing facility. Tax rules do not allow a deduction for the write-down unless the facility is actually sold. The facility was not sold by the end of the year. Excluding the trading securities and the restructuring the charge, income before taxes for the year was ₱4,000,000. The income tax rate for the current year and future years is 30%. What is DONNER's current tax expense?