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- In a certain civil case, plaintiff was awarded damages by the court in the sum of P20,000 representing profit he failed to realize on account of defendant’s failure to comply with his obligation to said plaintiff. Are those damages taxable against the plaintiff? a. No, because damages awarded are considered return of capital. b. No, because there is no sale transaction or exercise of profession in the awarding of damages. c. Yes, because the damages are not on account of injuries or sickness but for lost profit. d. Answer not givenGallardo Co. is involved in a lawsuit as a result of an accident that took place September 5, 2022. The lawsuit was filed on November 1, 2022, and claims damages of $1,000,000. At December 31, 2022, Gallardo’s attorneys feel it is remote that Gallardo will lose the lawsuit. How should the company account for the effects of the lawsuit? Assume instead that at December 31, 2022, Gallardo’s attorneys feel it is probable that Gallardo will lose the lawsuit and be required to pay $1,000,000. How should the company account for this lawsuit? Assume instead that at December 31, 2022, Gallardo’s attorneys feel it is reasonably possible that Gallardo could lose the lawsuit and be required to pay $1,000,000. How should the company account for this lawsuit? Prepare the current liabilities section of the balance sheet.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 Answer
- 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 liability 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 Amount a Estimated Litigation Liability 1,280,000 Account Name b. Dec 15, Year 2 Estimated Litigation Liability Cash Loss on Litigation…Huprey Company is the defendant in the following legal claims. For each of the following separate claims, indicate whether Huprey should (a) record a liability, (b) disclose in notes, or (c) have no disclosure. 1. Huprey is very likely to lose a pending lawsuit. It reasonably estimates that damages paid will be $1,070,000. 2. It is reasonably possible that Huprey will lose a pending lawsuit. Huprey and its lawyers cannot estimate what the damages will be if it loses. 3. There is a remote (unlikely) chance Huprey will lose a pending lawsuit. The plaintiff is suing Huprey for $5,000,000. 4 4If BrainTrain and Natasha had executed a written contract which contained a liquidated damages clause for $200 in the event that BrainTrain breached, and assuming BrainTrain admits to a breach, would that clause be upheld in court? Select Correct Answer a) Yes, it is reasonable and fair. b) No, in this case, actual damages can be easily determined. c) No, the amount is too low for the type of harm she suffered.
- Blette Company is the defendant in a lawsuit filed by Kale in 2021 disputing the validity of a copyright held by Blette. At December 31, 2021, Blette determined that Kale would probably be successful against Tone for an estimated amount of $420,000. Appropriately, a $420,000 loss was accrued by a charge to income for the year ended December 31, 2021. On December 15, 2022, Blette and Kale agreed to a settlement providing for a cash payment of $270,000 by Blette to Kale, and the transfer of Blette's copyright to Kale. The carrying amount of the copyright on Blette's accounting records was $80,000 at December 15, 2022. What would be the effect of the settlement on Blette's income before income tax in 2022? $150,000 increase $70,000 increase No effect $80,000 decreaseOn December 31, 2014, SBMA Inc. was a defendant in three litigations provided below: The first case is about environmental violation and the legal counsel determined that it isreasonably possible that SBMA will become liable in a the range of P4,000,000 to P6,000,000. The second case is about illegal dismissal and the legal counsel determined that it is remotethat SBMA will become liable in a reliable estimate of P3,000,000. The third case is about patent infringement and the legal counsel determined that it is probablethat SBMA will become liable in the following expected value:P2,000,000 - 50%P5,000,000 - 30%P10,000,000 - 20%Required: Determine the following for the year ended December 31, 2014:__________1. Accrued Provision on December 31, 2014__________2. Disclosed Contingent Liability on December 31, 2014Mr. Cruz was an employee of ABC Trading. He was killed by a co- employee in one of their regular “inuman" session. A case was filed by the heirs of Mr. Cruz against the co-employee. The court decided in favor of the heirs and awarded them the following: Description Amount Compensatory damages Moral damages Exemplary damages For attorney's fees and cost of lawsuit Consequential damages representing the loss of the victim's earning capacity P400,000 800,000 200,000 500,000 1,300,000 How much of the above is return of capital? P3,200,000 O P2,400,000 P2,200,000 P1,900,000
- Huprey Co. is the defendant in the following legal claims. For each of the following claims, indicatewhether Huprey should (a) record a liability, (b) disclose in notes, or (c) have no disclosure. Huprey can reasonably estimate that a pending lawsuit will result in damages of $1,250,000. It is probable that Huprey will lose the case.Roland, a basketball star, was under contract for one year to play-for-play exclusively for Lady Love, Inc. However, even before the basketball season could open, he was offered a more attractive pay plus fringes benefits by Sweet Taste, Inc. Roland accepted the offer and transferred to Sweet Taste. Lady Love sues Roland and Sweet Taste for breach of contract. Defendants claim that the restriction to pay for Lady Love alone is void, hence, unenforceable ,as it constitutes an undue interference with the right of Roland to enter into contracts and the impairment of his freedom to pay and enjoy basketball. Can Roland be bound by the contract he entered into with Lady Love or can he disregard the same? Is he liable at all? Reasons.Sunrise Company provided the following information on December 31, 2019: A personal injury liability suit for P500,000 was brought against Sunrise Company in March 2019. The management and legal counsel of Sunrise Company concluded that it is not probable that Sunrise Company will be responsible for damages and that P150,000 is the best estimate of the damages. In July 2019, Sunrise Company became involved in a tax dispute with the BIR pertaining to 2018 income tax. In December 2019, a judgment for P400,000 was assessed against Sunrise Company by the tax court. Sunrise Company is appealing the amount of judgment. The tax advisor and legal counsel of Sunrise Company believed it is probable that the assessment can be reduced on appeal by 50%. Sunrise Company signed as guarantor for P200,000 loan by PNB to Sunset Company, a principal supplier of Sunrise. By reason of financial difficulties, it is probable that Sunrise Company shall pay P200,000 loan with only a 60% recovery anticipated…