ProWasher is the defendant in a patent infringement lawsuit filed by Sue Case over ProWasher’s use of a hydraulic compressor in several of its products. Anna Turney claims that, if the suit goes against ProWasher, the loss may be as much as $5 million. It is more likely than not that ProWasher will have to pay some amount on the settlement. Although the exact amount is not known, the lawyer has been able to assign probabilities and expected payment amounts as follows (based on Statistics - probability distributions): 20% probability that the settlement will be $5 million, 35% probability that the settlement required will be $3 million, and 45% that no settlement will be required. How much is the patent liability?

ProWasher is the defendant in a patent infringement lawsuit filed by Sue Case over ProWasher’s use of a hydraulic compressor in several of its products. Anna Turney claims that, if the suit goes against ProWasher, the loss may be as much as $5 million. It is more likely than not that ProWasher will have to pay some amount on the settlement. Although the exact amount is not known, the lawyer has been able to assign probabilities and expected payment amounts as follows (based on Statistics - probability distributions): 20% probability that the settlement will be $5 million, 35% probability that the settlement required will be $3 million, and 45% that no settlement will be required. How much is the patent liability?

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter6: Business Expenses

Section: Chapter Questions

Problem 54P

See similar textbooks

Similar questions

ProWasher is the defendant in a patent infringement lawsuit filed by Sue Case over ProWasher’s use of a hydraulic compressor in several of its products. Anna Turney claims that, if the suit goes against ProWasher, the loss may be as much as $5 million. It is more likely than not that ProWasher will have to pay some amount on the settlement. Although the exact amount is not known, the lawyer has been able to assign probabilities and expected payment amounts as follows (based on Statistics - probability distributions): 20% probability that the settlement will be $5 million, 35% probability that the settlement required will be $3 million, and 45% that no settlement will be required. How much is the liability and explain
Electronic Innovators is the defendant in a $10 million lawsuit filed by one of its customers, Aviation Systems. The litigation is in final appeal, and legal counsel advises that it is probable that Electronic Innovators will lose the lawsuit. The estimated amount is somewhere between $6 and $10 million. How should Electronic Innovators account for this event?
Aviation Systems is involved in a $10 million lawsuit filed against one of its suppliers, Electronic Innovators. The litigation is in final appeal, and legal counsel advises that it is probable that Aviation Systems will win the lawsuit and be awarded somewhere between $6 and $10 million. How should Aviation Systems account for this event?
Pitchfork Company is being sued by a competitor in a lawsuit alleging patent infringement. Pitchfork's lawyers state that it is possible Pitchfork will lose the suit and be found liable for a judgment costing anywhere from $1,800,000 to $9,000,000. However, the lawyers state that no one estimate is more likely. As a result of the above information, Pitchforks should report: a contingent liability in the amount of $5,400,000, representing the average amount within the range of damages, on its Balance Sheet and disclose an additional contingency of up to $3,600,000 in the notes to the Balance Sheet. a contingent liability in the amount of $1,800,000 on its Balance Sheet and disclose an additional contingency of up to $7,200,000 in the notes to the Balance Sheet. a contingent liability in the amount of $5,400,000 on its Balance Sheet, but not disclose any additional contingency. O a possible contingency of between $1,800,000 and $9,000,000 only in the notes of the 10K.
Machine Corp. has several pending lawsuits against its company. Review each situation: A. A pending lawsuit, claiming $117,000 in damages, is considered likely to favor the plaintiff and can be reasonably estimated. B. Machine Corp. believes there might be other potential lawsuits about this faulty machinery, but this is unlikely to occur. C. A claimant sues Machine Corp. for damages, from a dishonored service contract agreement; the plaintiff will likely win the case but damages cannot be reasonably estimated. D. Machine Corp. believes a customer will win a lawsuit it filed, but the outcome is not likely and is not remote. It is possible the customer will win. 1 and 2. Which of the above situations require recognition in the financial statements and which require note disclosure only? a. A must be recognized and requires note disclosure; C and D require note disclosure only. b. All four cases require note disclosure only. c. A, C, and D must be recognized; B requires note…
Sweet Company recently was sued by a competitor for patent infringement. Attorneys have determined that it is probable that Sweet will lose the case and that a reasonable estimate of damages to be paid by Sweet is $315,000. In light of this case, Sweet is considering establishing a $103,400 self-insurance allowance. What entry, if any, should Sweet record to recognize this loss contingency?
In 2021, a lawsuit was filed against Keri Keri Co. for patent infringement. The plaintiff is claiming ₱400M in damages. Keri Keri’s legal counsel believes that it is probable that Keri Keri will lose the lawsuit and pay damages of not less than ₱40M but not more than ₱400M. The probability of any amount within the range is as likely as any other amount also within the range. The plaintiff has offered to settle the lawsuit out of court for ₱360M but Keri Keri did not agree to the settlement.How much is provision to be reported in Keri Keri’s year-end financial statements? a. P360,000,000 b. P220,000,000 c. P400,000,000 d. P40,000,000
In May, 2005, Sonic became involved in a litigation. The suit is being contested, but Sonic's lawyer believes it is possible that Sonic may be held liable for damages estimated in the range between P2,000,000 and P3,000,000, and no amount is a better estimate of potential liability than any other amount. What amount would be reported as liability?
SME A is a defendant in a breach of patent lawsuit. If the court rules in favor of the claimant, the lawyers believe that there is a 60 percent chance that the entity will be required to pay damages of P2 million (them amount sought by the claimant) and a 40 per cent chance that the entity will be required to pay damages of P1 million (the amount that was recently awarded by the same judge in a similar case). Other amounts of damages are unlikely. The court is expected to rule the following year (in late December 2023). There is no indication that the claimant will settle out of court. SME A's lawyers believe there is a probability of very slightly over 50% that SME A will successfully defend the case. A 7 percent risk adjustment factor to the cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An appropriate discount rate is 10 percent per year.What amount of provision must be recorded from the lawsuit as of December 31, 2022?
I need the qualitative aspect of the analysis
kill Hardware is the plaintiff in a $16 million lawsuit filed against a supplier. The litigation is in final appeal and legal counsel advises that it is virtually certain that Skill will win the lawsuit and be awarded $12 million. How should Skill account for this event? check any boxes below The contingency is acrrued The contingency is not accrued This is a gain contingency This is a loss contingency It is probable that the confirming event will occur The contingency can be reasonably estimated A disclosure note should describe the contingency None of these
Haresh