Voi company provided the following facts regarding pending litigation on December 31,2020 1. The entity is defending against a first lawsuit and believe that there is a 51% chance that it will lose in court. The entity estimate that damages amounting to P 1,000,000 2. The entity is defending against a second lawsuit which management believes it is virtually certain to lose in court. If it losses, management estimate damages will amount in between P 3,000,000 to P 5,000,000 3. The entity is defending a third but the relevant loss will incur in the future. The present values of the endpoints of the range are P 1,500,000 and P 2,500,000. The management believes the effect of the time value of money on these amounts are Materials but also believes the timing of these amount are uncertain. 4. The entity is defending against a fourth lawsuit and believes there is only 25% chance it will lose in court.If the entity lose management believes damages will likely be from P 3,000,000 to P 4,000,000 with each amount in that range equally likely to occur. Required: Determine if each of the above cases required a provision or not. Explain Why.
Voi company provided the following facts regarding pending litigation on December 31,2020 1. The entity is defending against a first lawsuit and believe that there is a 51% chance that it will lose in court. The entity estimate that damages amounting to P 1,000,000 2. The entity is defending against a second lawsuit which management believes it is virtually certain to lose in court. If it losses, management estimate damages will amount in between P 3,000,000 to P 5,000,000 3. The entity is defending a third but the relevant loss will incur in the future. The present values of the endpoints of the range are P 1,500,000 and P 2,500,000. The management believes the effect of the time value of money on these amounts are Materials but also believes the timing of these amount are uncertain. 4. The entity is defending against a fourth lawsuit and believes there is only 25% chance it will lose in court.If the entity lose management believes damages will likely be from P 3,000,000 to P 4,000,000 with each amount in that range equally likely to occur. Required: Determine if each of the above cases required a provision or not. Explain Why.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Voi company provided the following facts regarding pending litigation on December 31,2020
1. The entity is defending against a first lawsuit and believe that there is a 51% chance that it will lose in court. The entity estimate that damages amounting to P 1,000,000
2. The entity is defending against a second lawsuit which management believes it is virtually certain to lose in court. If it losses, management estimate damages will amount in between P 3,000,000 to P 5,000,000
3. The entity is defending a third but the relevant loss will incur in the future. The present values of the endpoints of the range are P 1,500,000 and P 2,500,000. The management believes the effect of the time value of money on these amounts are Materials but also believes the timing of these amount are uncertain.
4. The entity is defending against a fourth lawsuit and believes there is only 25% chance it will lose in court.If the entity lose management believes damages will likely be from P 3,000,000 to P 4,000,000 with each amount in that range equally likely to occur.
Required: Determine if each of the above cases required a provision or not. Explain Why.
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