Pitt Company is the defendant in a lawsuit filed by Hoffman in Year 1 disputing the validity of a copyright held by Pitt. At December 31 of Year 1, Pitt determined that Hoffman would probably be successful against Pitt for an estimated amount of $1,280,000. Appropriately, an $1,280,000 loss was accrued by a charge to income of Pitt for the year ended December 31 of Year 1. On December 15 of Year 2, Pitt and Hoffman agreed to a settlement providing for cash payment of $800,000 by Pitt to Hoffman and transfer of Pitt's copyright to Hoffman. The carrying amount of the copyright on Pitt's accounting records was $192,000 at December 15 of Year 2 a. What would be the effect of the settlement of this ability on Pitt's pretax income before income tax in Year 27 b. Record the entry on December 15 of Year 2 for Pitt Company. Income Statement Classification a Estimated Litigation Liability Amount 1.280,000 Account Name b. Dec 15, Year 2 Estimated Litigation Liability Cash Loss on Litigation Settlement Accounts Receivable to record settlement lawat Dr. 1,280.000 800,000

Pitt Company is the defendant in a lawsuit filed by Hoffman in Year 1 disputing the validity of a copyright held by Pitt. At December 31 of Year 1, Pitt determined that Hoffman would probably be successful against Pitt for an estimated amount of $1,280,000. Appropriately, an $1,280,000 loss was accrued by a charge to income of Pitt for the year ended December 31 of Year 1. On December 15 of Year 2, Pitt and Hoffman agreed to a settlement providing for cash payment of $800,000 by Pitt to Hoffman and transfer of Pitt's copyright to Hoffman. The carrying amount of the copyright on Pitt's accounting records was $192,000 at December 15 of Year 2 a. What would be the effect of the settlement of this ability on Pitt's pretax income before income tax in Year 27 b. Record the entry on December 15 of Year 2 for Pitt Company. Income Statement Classification a Estimated Litigation Liability Amount 1.280,000 Account Name b. Dec 15, Year 2 Estimated Litigation Liability Cash Loss on Litigation Settlement Accounts Receivable to record settlement lawat Dr. 1,280.000 800,000

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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