On 04 February 2019, the judge presiding over the case ruled that Fresh should pay $ 1 000 000 to the plaintiff as well as pay all of the plaintiff's
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Fresh Limited, a manufacturer of toothpaste, was taken to court over alleged defamation charges when the company accused a rival toothpaste manufacturer of fraud. Before year end (31 December 2018), the lawyer of Fresh Limited advised that, although losing the case was unlikely, legal fees and settlement costs could amount to $ 900 000 in the event that the court case was lost.
On 04 February 2019, the judge presiding over the case ruled that Fresh should pay $ 1 000 000 to the plaintiff as well as pay all of the plaintiff's legal fees, which amounted to $ 180 000. The financial statements had not yet been authorized for issue at the time of the court ruling.
Required:
Discuss how this information should be treated in the financial statements of Fresh Limited for the year ended 31 December 2018
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- A lawsuit has been filed against Sunland Company for wrongful termination. Sunland's legal counsel had encouraged the company to settle because it is likely they will lose the case. The amount of the loss is estimated to be between $573000 and $1062000. Legal counsel believes that the case could be settled for $864000. Sunland should report O a contingent liability for $864000. O an estimated liability for $573000. O a contingent loss of $1062000. O no loss or liability until the case is settled. Attempts: 0 of 1 used Submit AnswerEastern 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 $114 million plus interest, a total of $129 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 $147 million will be required to cover the cost of violations. Eastern believes that…Faramarzinikpey Company, a public company, is preparing its annual financial statements on December 31, 2022. The following selected information is available: The company has been sued by an employee for discrimination. The employee is seeking $5,000,000 in damages. Legal counsel believes it is unlikely that the company will have to pay any damages. The amount is material ( substantial ) to the company. Employees have accrued ( earned ) $4,200 in vacation pay benefits as of December 31,2022. The company has been sued in a $ 3,000,000 product liability lawsuit. Legal counsel believes the company will probably have to pay the full amount. On October 1, 2022, the company signed a $ 10,000, 6-month, 8% note payable. No interest has been accrued to date. Instructions: Prepare any necessary adjusting entries or disclosures on December 31, 2022.
- On October 2, 2020, Laplante Company sold $6,000 of its elite camping gear (with a cost of $3,600) to Lynch Outfitters. As part of the sales agreement, Laplante includes a provision that if Lynch is dissatisfied with the product, Laplante will grant an allowance on the sales price or agree to take the product back (although returns are rare, given the long-term relationship between Laplante and Lynch). Lynch expects total allowances to Lynch to be $800. On October 16, 2020, Laplante grants an allowance of $400 to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog. Instructions a. Prepare journal entries for Laplante to record (1) the sale on October 2, 2020, (2) the granting of the allowance on October 16, 2020, and, (c) any adjusting required on October 31, 2020 (when Laplante prepares financial statements). Laplante now estimates additional allowances of $250 will be granted to Lynch in the future. b. Indicate the…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 February 20, 2024. What amount should the Company accrue as provision for the year ended December 31, 2023?An employee sued Harrington Company in late 2023. General counsel concluded that there was an 80 percent probability that the company would lose the lawsuit. The range of loss is estimated to be $21,000 to $73,500, with no amount in the range more likely than any other. They settled the lawsuit in 2024, with Harrington making a payment of $63,000. Assume that Harrington Company is a U.S.-based company that is issuing securities to foreign investors who require financial statements prepared accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes. Required: Prepare journal entries for this lawsuit for the years ending December 31, 2023, and December 31, 2024, under (1) U.S. GAAP and (2) IFRS. Prepare the entry(ies) that Harrington would make on the December 31, 2023, and December 31, 2024, conversion worksheets to convert U.S. GAAP balances to IFRS. Record the entry for the litigation liability as per U.S. GAAP. Note: Enter…
- P incurs $8,000 of damages because of D's negligent handling of radioactive waste. The administrative costs of a trial would be $3,000 (all costs, for all parties and court). Which of the following statements is true? Assume a trial would give us the "correct" damage award. P's legal fees would be $1,000. O Social costs would be zero if P dropped the lawsuit against D. O P's threat value is $8.000 O Litigating this matter is inefficient unless the error costs are $3,000 or more. O Litigating this matter is inefficient because the costs definitely outweigh the benefit.During 2019, Maricar Company guaranteed a supplier’s P5,000,000 loan from a bank. On October 1, 2020. Maricar was notified that the supplier had defaulted on the loan and filed for bankruptcy protection. The counsel believes Maricar will probably have to pay between P2,500,000 and P4,500,000 under its guaranty. As a result of the supplier’s bankruptcy, Maricar entered into a contract in December 2020, to retool its machines so that Maricar could accept parts from other suppliers. Retooling costs are estimated to be P3,000,000. What amount should Maricar report as a liability in its December 31, 2020 balance sheet? Group of answer choices A.) 4,500,000 B.) 5,000,000 C.) 5,500,000 D. ) 2,500,000On January 1, 2021, a Dune Corporation truck was in an accident with an auto driven by R. Bell. Dune received notice on January 12, 2021, of a lawsuit for $700,000 in damages for personal injuries suffered by Bell. Dune Corporation’s legal counsel believes it is probable that Bell will be awarded an estimated amount in the range between $200,000 and $500,000, Dune’s accounting year ends on December 31, and the 2020 financial statements were issued on March 31, 2021. What amount of provision should Dune accrue on December 31, 2020?
- Cline Inc. prepares its financial statements according to International Accounting Standards (IFRS). It recently concluded that it will lose a lawsuit, and that it will pay a range of damages falling somewhere between $10 million and $20 million. Cline should accrue a liability in the amount of. a. $0, as no specific amount is probable to be incurred. b. $10 million, the lower end of the range of probable amounts. c. $15 million, the expected value of the amount to be paid. d. $20 million, the upper end of the range of probable amounts.Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern’s fiscal year ends December 31, and the 2021 financial statements are issued on March 15, 2022. Eastern is involved in a lawsuit resulting from a dispute with a supplier. On February 3, 2022, judgment was rendered against Eastern in the amount of $124 million plus interest, a total of $139 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. In November 2020, 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, 2022, Eastern reached a settlement with state authorities. Based upon discussions with legal counsel, the Company feels it is probable that $157 million will be required to cover the cost of violations. Eastern believes that the…