Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated on 31 st December, 2018. Given information: The company has gone through a case in which P sued for patent infringement. As on December 31 st , 2018, the case was in the early stage and the company believed that they are likely to win. By the end of year 2019, the case progressed and potential liability was estimated between $1 million to $3 million. By 31 st March, 2020 the company realized that they are going to lose the case while the loss estimated at that time was $4 million.

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Answer 1

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 1JC

1.

To determine

Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated on 31^st December, 2018.

Given information:

The company has gone through a case in which P sued for patent infringement. As on December 31^st, 2018, the case was in the early stage and the company believed that they are likely to win. By the end of year 2019, the case progressed and potential liability was estimated between $1 million to $3 million. By 31^st March, 2020 the company realized that they are going to lose the case while the loss estimated at that time was $4 million.

2.

To determine

The way in which the contingency should be reported as on December 31^st, 2019.

3.

To determine

The way in which the contingency should be reported as on December 31^st, 2020.

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Answer 2

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 1JC

1.

To determine

Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated on 31^st December, 2018.

Given information:

The company has gone through a case in which P sued for patent infringement. As on December 31^st, 2018, the case was in the early stage and the company believed that they are likely to win. By the end of year 2019, the case progressed and potential liability was estimated between $1 million to $3 million. By 31^st March, 2020 the company realized that they are going to lose the case while the loss estimated at that time was $4 million.

2.

To determine

The way in which the contingency should be reported as on December 31^st, 2019.

3.

To determine

The way in which the contingency should be reported as on December 31^st, 2020.

Expert Solution & Answer

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Answer 3

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 1JC

1.

To determine

Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated on 31^st December, 2018.

Given information:

The company has gone through a case in which P sued for patent infringement. As on December 31^st, 2018, the case was in the early stage and the company believed that they are likely to win. By the end of year 2019, the case progressed and potential liability was estimated between $1 million to $3 million. By 31^st March, 2020 the company realized that they are going to lose the case while the loss estimated at that time was $4 million.

2.

To determine

The way in which the contingency should be reported as on December 31^st, 2019.

3.

To determine

The way in which the contingency should be reported as on December 31^st, 2020.

Expert Solution & Answer

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Answer 4

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 1JC

1.

To determine

Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated on 31^st December, 2018.

Given information:

The company has gone through a case in which P sued for patent infringement. As on December 31^st, 2018, the case was in the early stage and the company believed that they are likely to win. By the end of year 2019, the case progressed and potential liability was estimated between $1 million to $3 million. By 31^st March, 2020 the company realized that they are going to lose the case while the loss estimated at that time was $4 million.

2.

To determine

The way in which the contingency should be reported as on December 31^st, 2019.

3.

To determine

The way in which the contingency should be reported as on December 31^st, 2020.

Expert Solution & Answer

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Answer 5

Chapter 13, Problem 1JC

1.

To determine

Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated on 31^st December, 2018.

Given information:

The company has gone through a case in which P sued for patent infringement. As on December 31^st, 2018, the case was in the early stage and the company believed that they are likely to win. By the end of year 2019, the case progressed and potential liability was estimated between $1 million to $3 million. By 31^st March, 2020 the company realized that they are going to lose the case while the loss estimated at that time was $4 million.

2.

To determine

The way in which the contingency should be reported as on December 31^st, 2019.

3.

To determine

The way in which the contingency should be reported as on December 31^st, 2020.

Answer 6

Chapter 13, Problem 1JC

1.

To determine

Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated on 31^st December, 2018.

Given information:

The company has gone through a case in which P sued for patent infringement. As on December 31^st, 2018, the case was in the early stage and the company believed that they are likely to win. By the end of year 2019, the case progressed and potential liability was estimated between $1 million to $3 million. By 31^st March, 2020 the company realized that they are going to lose the case while the loss estimated at that time was $4 million.

Answer 7

Chapter 13, Problem 1JC

1.

To determine

Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated on 31^st December, 2018.

Given information:

The company has gone through a case in which P sued for patent infringement. As on December 31^st, 2018, the case was in the early stage and the company believed that they are likely to win. By the end of year 2019, the case progressed and potential liability was estimated between $1 million to $3 million. By 31^st March, 2020 the company realized that they are going to lose the case while the loss estimated at that time was $4 million.

Answer 8

2.

To determine

The way in which the contingency should be reported as on December 31^st, 2019.

Answer 9

2.

To determine

The way in which the contingency should be reported as on December 31^st, 2019.

Answer 10

3.

To determine

The way in which the contingency should be reported as on December 31^st, 2020.

Answer 11

3.

To determine

The way in which the contingency should be reported as on December 31^st, 2020.

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

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Solution Summary: The author determines whether the company should accrue, disclose or not report at all the contingency in the financial statement.

Concept explainers

The way in which the contingency should be reported as on December 31^st, 2019.

The way in which the contingency should be reported as on December 31^st, 2020.

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Chapter 13 Solutions

Solution Summary: The author determines whether the company should accrue, disclose or not report at all the contingency in the financial statement.

Concept explainers

The way in which the contingency should be reported as on December 31st, 2019.

The way in which the contingency should be reported as on December 31st, 2020.

Want to see the full answer?

Chapter 13 Solutions

The way in which the contingency should be reported as on December 31^st, 2019.

The way in which the contingency should be reported as on December 31^st, 2020.