Reeves Co. filed suit against Higgins, Inc., seeking damages for copyright violations. Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of $100,000 to $200,000, with all amounts in the range considered equally likely. How should Higgins report this litigation? Multiple Choice As a liability for $100,000 with disclosure of the range. As a liability for $150,000 with disclosure of the range. As a liability for $200,000 with disclosure of the range. As a disclosure only. No liability is reported.

Reeves Co. filed suit against Higgins, Inc., seeking damages for copyright violations. Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of $100,000 to $200,000, with all amounts in the range considered equally likely. How should Higgins report this litigation? Multiple Choice As a liability for $100,000 with disclosure of the range. As a liability for $150,000 with disclosure of the range. As a liability for $200,000 with disclosure of the range. As a disclosure only. No liability is reported.

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

Reeves Company filed suit against Higgins, Incorporated, seeking damages for copyright violations. Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of $150,000 to $250,000, with all amounts in the range considered equally likely. How should Higgins report this litigation? Multiple Choice As a liability for $150,000 with disclosure of the range As a liability for $200,000 with disclosure of the range In a disclosure only, no liability is reported As a liability for $250,000 with disclosure of the range
Reeves Co. filed suit against Higgins, Inc., seeking damages for copyright violations. Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of $170,000 to $270,000, with all amounts in the range considered equally likely. How should Higgins report this litigation? Multiple Choice As a liability for $170,000 with disclosure of the range. As a disclosure only. No liability is reported. As a liability for $270,000 with disclosure of the range. As a liability for $220,000 with disclosure of the range.
Reeves Company filed suit against Higgins, Incorporated, seeking damages for copyright violations. Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of $190,000 to $290,000, with all amounts in the range considered equally likely. How should Higgins report this litigation? Multiple Choice As a liability for $290,000 with disclosure of the range In a disclosure only; no liability is reported As a liability for $240,000 with disclosure of the range As a liability for $190,000 with disclosure of the range
Smith Co. filed suit against Western, Inc., seeking damages for patent infringement. Western’s legal counsel believes it is probable that Western will have to pay an estimated amount in the range of $75,000 to $175,000, with all amounts in the range considered equally likely. How should Western report this litigation?a. As a liability for $75,000 with disclosure of the range. b. As a liability for $125,000 with disclosure of the range. c. As a liability for $175,000 with disclosure of the range. d. As a disclosure only. No liability is reported.
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 decrease
Axel Brick Company has a lawsuit pending from a customer claiming $100,000 in damages. Axel's attorney advises the likelihood the customer will win the lawsuit is reasonably probable. GAAP requires at a minimum that this contingent liability be...
Pitt Company is the defendant in a lawsuit filed by Hoffman in 2020 disputing the validity of a copyright held by Pitt. At December 31, 2020, Pitt determined that Hoffman would probably be successful against Pitt for an estimated amount of $800,000. Appropriately, an $800,000 loss was accrued by a charge to income of Pitt for the year ended December 31, 2020. On December 15, 2021, Pitt and Hoffman agreed to a settlement providing for cash payment of $500,000 by Pitt to Hoffman and transfer of Pitt's copyright to Hoffman. The carrying amount of the copyright on Pitt's accounting records was $120,000 at December 15, 2021. a. What would be the effect of the settlement of this liability on Pitt's income before income tax in 2021? b. Record the entry on December 15, 2021 for Pitt Company.
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?
1. Medrano is the defendant in a lawsuit filed by Witt in 2018 disputing the validity of copyright held by Tone. December 31, 2018, Tone determined that Witt would probably be successful for an estimated amount of $400, 000. Appropriately, a $400, 000 loss was accrued by a charge to income for the year ended December 31, 2018. On December 31, 2019, Tone and Witt agreed to a settlement providing for a cash payment of $250, 000 by Tone to Witt, and transfer of Tone’s copyright to Witt. The carrying amount of the copyright on tone’s accounting records was $60, 000 on December 31, 2019. What would be the effect of the settlement on Tone’s income before tax in 2019? 2. On December 31, 20x2, Apostol determines an indication that the impairment loss recognized in the prior period may no longer exist. The revised recoverable amount of the building on December 31, 20x2 is $1,280,000. If no impairment loss had been recognized in the prior period, the carrying amount of the building on December…
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.
Swell Company has a lawsuit pending from a customer claiming damages of $100,000. Swell’s attorney advises that the likelihood the customer will win is remote. GAAP requires at a minimum that this contingent liability be disclosed in the footnotes. disclosed in the footnotes, with ranges of the potential loss. recorded as a journal entry, as well as disclosed in the footnotes. No disclosure is required.
Tone Company is the defendant in a lawsuit filed by Witt in 2019 disputing the validity of copyright held by Tone. December 31, 2019, Tone determined that Witt would probably be successful for an estimated amount of P400, 000. Appropriately, a P400, 000 loss was accrued by a charge to income for the year ended December 31, 2019.On December 31, 2020, Tone and Witt agreed to a settlement providing for cash payment of P250, 000 by Tone to Witt, and transfer of Tone’s copyright to Witt. The carrying amount of the copyright on tone’s accounting records was P60, 000 on December 31, 2020. What would be the effect on the settlement on Tone’s income before tax in 2020?