Eastern Company provided the following information on 31, * * * In May 2022, Eastern Company became involved in litigation. In December 2022, the court assessed a judgment for P1,600,000 against Eastern Company. The entity is appealing the amount of the judgment. The attorneys believed it is probable that the assessment can be reduced on appeal by 50%. The appeal is expected to take at least a year. In July 2022, Pasig City brought action against Eastern Company for polluting the Pasig River with its waste products. It is probable that Pasig City will be successful but the amount of damages the entity might have to pay should not exceed P1,500,000. Eastern Company signed as guarantor for a P1,000,000 loan by First Bank to Northern Company, a principal supplier to Eastern Company. At this time, there is a only a remote likelihood that Eastern Company will have to make payment on behalf of Northern Company. Eastern Company owned a manufacturing site that had now been discovered to be contaminated with toxic waste. The entity had acknowledged its responsibility for the contamination. An initial clean up feasibility study has shown that it will cost at least P500,000 to clean up the toxic waste. Eastern Company had been sued for patent infringement and lost the case. A preliminary judgment of P300,000 was issued and is under appeal. The entity's attorneys believed that it is probable that the entity will lose this appeal. Required: Prepare journal entries to recognize any provision at the end of current year.
Eastern Company provided the following information on 31, * * * In May 2022, Eastern Company became involved in litigation. In December 2022, the court assessed a judgment for P1,600,000 against Eastern Company. The entity is appealing the amount of the judgment. The attorneys believed it is probable that the assessment can be reduced on appeal by 50%. The appeal is expected to take at least a year. In July 2022, Pasig City brought action against Eastern Company for polluting the Pasig River with its waste products. It is probable that Pasig City will be successful but the amount of damages the entity might have to pay should not exceed P1,500,000. Eastern Company signed as guarantor for a P1,000,000 loan by First Bank to Northern Company, a principal supplier to Eastern Company. At this time, there is a only a remote likelihood that Eastern Company will have to make payment on behalf of Northern Company. Eastern Company owned a manufacturing site that had now been discovered to be contaminated with toxic waste. The entity had acknowledged its responsibility for the contamination. An initial clean up feasibility study has shown that it will cost at least P500,000 to clean up the toxic waste. Eastern Company had been sued for patent infringement and lost the case. A preliminary judgment of P300,000 was issued and is under appeal. The entity's attorneys believed that it is probable that the entity will lose this appeal. Required: Prepare journal entries to recognize any provision at the end of current year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Eastern Company provided the following information on
December 31, 2022.
In May 2022, Eastern Company became involved in
litigation. In December 2022, the court assessed
judgment for P1,600,000 against Eastern Company. The
entity is appealing the amount of the judgment.
The attorneys believed it is probable that the assessment
can be reduced on appeal by 50%. The appeal is expected
to take at least a year.
In July 2022, Pasig City brought action against Eastern
Company for polluting the Pasig River with its waste
products.
It is probable that Pasig City will be successful but the
amount of damages the entity might have to pay should
not exceed P1,500,000.
Eastern Company signed as guarantor for a P1,000,000
loan by First Bank to Northern Company, a principal
supplier to Eastern Company.
At this time, there is a only a remote likelihood that Eastern
Company will have to make payment on behalf of Northern
Company.
Eastern Company owned a manufacturing site that had
now been discovered to be contaminated with toxic waste.
The entity had acknowledged its responsibility for the
contamination.
An initial clean up feasibility study has shown that it
will cost at least P500,000 to clean up the toxic waste.
Eastern Company had been sued for patent infringement
and lost the case. A preliminary judgment of P300,000 was
issued and is under appeal.
The entity's attorneys believed that it is probable that the
entity will lose this appeal.
Required:
Prepare journal entries to recognize any provision at the
end of current year.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education