In Year 1, Better Sleep Company began to receive complaints from physicians that patients were experiencing unexpected side effects from the company's sleep apnea drug. The company took the drug off the market near the end of Year 1. During Year 2, the company was sued by 1,000 customers who had had a severe allergic reaction to the company's drug and required hospitalization. At the end of Year 2, the company's attorneys estimated a 60 percent chance the company would need to make payments in the range of $1,000 to $5,000 to settle each claim, with all amounts in that range being equally likely. At the end of Year 3, while none of the cases had been resolved, the company’s attorneys now estimated an 80 percent probability the company would be required to make payments in the range of $2,000 to $7,000 to settle each claim. In Year 4, 400 claims were settled at a total cost of $1.2 million. Based on this experience, the company believes 30 percent of the remaining cases will be settled for $3,000 each, 50 percent will be settled for $5,000, and 20 percent will be settled for $10,000.Required:Prepare journal entries for Years 1–4 related to this litigation.

In year 1, There are no claims, hence no journal entry is required as per the standards. In year…

Answered: In Year 1, Better Sleep Company began…

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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WatchNU is a company that designs and manufacturers drones for military use. The supply manager is getting ready to renegotiate the contract with the security service provider that it uses for its offices and manufacturing plant. Three suppliers responded to the RFP for security services for the next three years. The current security services provider, SecurelT quoted $920,000 per year. Two suppliers that have not been used by WatchNU in the past quoted $835,000 and $742,000 respectively. The supply manager is also analyzing the costs associated with insourcing security services rather than using a supplier as a way to reduce costs and provide greater control over security. The salary and benefits for a full-time security services manager is estimated to be $91,000. Other fixed costs are estimated to be $21,000/year. Three security guards are needed 24 hours/day, 365 days per year. The salary and benefits for the security guards is $26/hour. a. What are the costs to insource the…
Required: Answer the following questions In June 2021, a costumer at ABC Corp slipped on a wet floor and broke a hip. The costumer sued the corporation in July,2021. The company's attorneys believe that it is 55% likely that ABC will lose this case. Management.concludes that the 55% likelihood of incurring the loss is less than probable. The attorneys estimate that the loss will range between $700,000 and $800,000, Management There is no best estimate in this range of possible losses. The company beginning balance for provision liability is $100,000. The company's management considers that it is highly likely (85%) that they will receive other customer claims, therefore they want the ending balance of the provision liability to be $900,000. Use IFRS to identify the loss and provision liability. You must show the computations to receive the score.
Daniel Hudson, the general counsel of eHarbour, has received a letter from a dissatisfied eHarbour user. The user downloaded the eHarbour app to his phone and used the navigation software to compete in a local regatta. The user claims that the app stopped working during the regatta when he was leading the race and that he ended up placing fourth rather than winning the regatta. An internal investigation shows that the software indeed had a temporary service outage on the day of the race for approximately 10 minutes for selected users. The customer is demanding $100,000, including the $5,000 prize awarded to the first-place winner, and emotional damages in the amount of $95,000 for not winning the race. The company is worried about the bad publicity with a lawsuit but does not want to pay such a large settlement. Discuss the different types of alternative dispute resolution that could be used to avoid litigation. In your role as a paralegal or legal assistant at eHarbour, give a…
John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming asked you to evaluate costs in the hospital's lab for the past month. The following information is available: a. Two types of tests are performed in the lab-blood tests and smears. During the past month, 900 blood tests and 3,300 smears were performed in the lab. b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 16,500 plates at a cost of $35,640. 2,300 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. c. During the past month, 2,300 hours of labor…
On October 5, 2023, Diamond in the Bramble Recruiting Group Inc's board of directors decided to dispose of the Blue Division. A formal plan was approved. Diamond derives approximately 70% of its income from its human resources management practice. The Blue Division gets contracts to perform human resources management on an outsourced basis. The board decided to dispose of the division because of unfavourable operating results. Net income for Diamond was $89,320 for the fiscal year ended December 31, 2023 (after a charge for tax at 30% and after a writedown for the Blue assets). Income from operations of the Blue Division accounted for $3,920 (after tax) of this amount. Because of the unfavourable results and the extreme competition, the board believes that it cannot sell the business intact. Its final decision is to auction off the office equipment. The equipment is the division's only asset and has a carrying value of $24,000 at October 5, 2023. The board believes that proceeds from…

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