What should DAC and WFT record at the end of the year concerning the lawsuit? Select one: a. DAC does not record any loss; WFT records a $5,000,000 gain. b. Neither company records a loss or gain c. DAC records a $5,000,000 loss; WFT records a $5,000,000 gain d. DAC records a $5,000,000 loss; WFT does not record any gain

What should DAC and WFT record at the end of the year concerning the lawsuit? Select one: a. DAC does not record any loss; WFT records a $5,000,000 gain. b. Neither company records a loss or gain c. DAC records a $5,000,000 loss; WFT records a $5,000,000 gain d. DAC records a $5,000,000 loss; WFT does not record any gain

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

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter7: Losses—deductions And Limitations

Section: Chapter Questions

Problem 17P

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DAC, Inc. is being sued by WFT Corp.for $5,000,000. At the end of the year, DAC feels it is reasonably possible that it will pay $5,000,000 at some point in the following year. What should DAC and WFT record at the end of the year concerning the lawsuit?
Big Hitter Corp. is facing a class-action lawsuit in theupcoming year. It is possible, but not probable, that thecompany will have to pay a settlement of approximately$2,000,000 in the upcoming year. How would this fact bereported, if at all, in the financial statements prepared atthe end of the current month using GAAP?a. Report $2,000,000 as a current liability.b. Report $2,000,000 as a long-term liability.c. Describe the potential liability in the notes to thefinancial statements.d. Reporting is not required in this case.
While providing services to Palmer Co.. Raider Group caused damages of $125.000. As of the end of the year, both parties agree that it is probable that Raider will pay Palmer the full amount of the damages within the next two months. How would Raider and Palmer report the lawsuit at the end of the year? O Raider reports nothing: Palmer reports nothing. Raider reports nothing: Palmer reports a gain. Raider reports a loss: Palmer reports a gain. Raider reports a loss: Palmer reports nothing. There is not enough information to answer the questions. C
While providing services to Palmer Co., Raider Group caused damages of $125,000. As of the end of the year, both parties agree that it is probable that Raider will pay Palmer the full amount of the damages within the next two months. How would Raider and Palmer report the lawsuit at the end of the year? Raider reports nothing: Palmer reports nothing. Raider reports nothing: Palmer reports a gain. Raider reports a loss; Palmer reports a gain. Raider reports a loss: Palmer reports nothing. There is not enough information to answer the questions.
Loretta Inc. is suing one of its customers for one million dollars. The likelihood of winning the case is likely according to their lawyers and the amount is determinable. What is the correct accounting treatment? a. A brief description of the lawsuit is disclosed in the notes b. Record an asset for $1,000,000 c. Decrease Retained earnings for $1,000,000 d. Record a liability of $1,000,000
Dodd Corp. is preparing its December 31 financial statements and must determine the proper accounting treatment for the following situations • For the year ended December 31, Dodd has a loss carry forward of $180,000 available to offset future taxable income, However, there are no temporary differences. On December 30, Dodd received a $200,000 offer for its patent Dodd's management is considering whether to sell the patent. The offer expires on February 28 of the next year. The patent has a carrying amount of $100,000 at December 31 Assume a current and future income tax rate of 21 percent. In its income statement, Dodd should recognize an increase in net income of O $0 O $37,800 $79,000
Before any debt cancellation, the insolvent KuhnCo holds business equipment, its only asset, with a fair market value of $1 million and related liabilities of $1.25 million. The lender agrees to cancel $400,000 of the liabilities. KuhnCo has no other liabilities. a. How much gross income does KuhnCo report as a result of the debt cancellation? b. How would your answer change, if at all, had the lender cancelled $200,000 of the debt?
Tender Foot, Inc., is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that it may lose the case. The attorney estimated that there is a 50% chance of losing. The attorney estimated that the amount of any payment would be between P500,000 and P800,000 with P500,000 as the best estimate. How much should be recognized as a liability?
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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
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?
Gallardo 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.