b) Kleinberg Corporation was sued by a customer for product liability. The customer sought damages of $1,500,000. At the its December 31, 2012, year-end, the company obtained an opinion from their lawyers that the customer had a 75% likelihood of winning the suit with the damages likely to be assessed in the range of $800,000 to $1,200,000. Legal costs were estimated to amount to a further $150,000. In late January, before the company’s financial statements had been finalized, the company settled the claim with the customer for $800,000. The lawyers estimated their fees to be reduced to $80,000 because the matter was settled without going to court.…
Danle said that it did not believe that it was probable a loss would occur and could not reasonably estimate an exact amount of the potential loss. However, it is also stated in the paragraph 450-20-50-5 that disclosure is preferable to accrual when a reasonable estimate of loss cannot be made. Even though it is not probable that a liability had been incurred, disclosure also should be made for some loss contingencies for which there is a reasonable possibility that a loss may have been incurred.…
2. The accounting firm has potential liability to any person who acquired the stock in reliance on the registration statement. – True, in case of any part of the registration statement containing an untrue statement of a material fact, any person acquitting such security may sue.…
University of Arizona Accounting 554 Case #1: Dow Chemical Company Goals: • • • Become familiar with a set of financial statements including auditor opinion and significant accounting policy footnote, Perform basic analysis and interpretation of the financial statements, including common size analysis, Recognize the role of estimates in the measurement of financial statement amounts.…
Identify the parties involved in the case dispute (who is the plaintiff and who is the defendant).…
Financial statements provide documentation of a company’s financial history for a set timeframe. One of the financial statement used by investors, creditors, and mangers is the balance sheet. The second statement used by accountant’s income statement, which is also important to shareholders. The third statement is the retained earnings statement, and the fourth financial statement is the statement of cash flows. Each financial statement has a different purpose and shows different aspects of the company’s finances. However, these financial statements are integrated and work together to provide shareholders financial information. This paper will defines the four financial statements while explaining the financial statement most suitable for either an investor, creditor, or management.…
The scenario that present this case is a company faces litigation. I have to surmise how this liability will be reported as well as the resulting effects on the financial statements in the years presented. I will present some facts of this case, and by these facts I will resolve the primary accounting which in my opinion it could accrued the liability, disclose the liability or count it as immaterial.…
XYZ Research Company was incorporated in 2010 and their business mainly focuses on developing new technology for interplanetary exploration. Due to the nature of their business, the majority of their business costs are considered as research and development costs. Research and development costs will be defined later in the body of the paper. The company owns quite a few patents and has always expensed all of the costs that were associated with obtaining their patents. A patent legally prohibits others from producing a product and allows the holder to sell the rights to produce the underlying goods to other businesses (Cromwell, 2015). It makes sense to expense patent costs as incurred since there can be no guarantee of any specific patent application being granted, nor of any commercial value being achievable from the granting of a specific patent (Westbrook, 2013). The owners of the company are unsure if any or all of their patent costs can be capitalized and if any impairment testing should be done periodically on their patents.…
1. For the year-end December 31, 2007, financial statements, M should record $17 million as a liability.…
NOTE: In addition to the in-chapter and end-of-chapter exercises which serve as short cases you will find the following short cases arranged by course title that can also be utilized as short cases that require the student to access the authoritative literature to address the issue presented in the case. Solutions to the cases below are available to instructors on the Weirich Accounting & Auditing Research 8e instructor website at www.wiley.com/college/weirich. Other excellent sources of longer and more detailed cases include the Deloitte Trueblood cases and cases provided by various other firms.…
In the client's first dispute, I disagree with its position to not disclose the possibility of a loss. Cubbies argued “there was nothing to confirm the CPA firm’s position in that regard and the company would only disclose it if they lost the lawsuit.” But with contingent liabilities, losses that are probable should be disclosed as a liability, even if the loss is not estimable. In this dispute, the class-action lawsuit against Cubbies for age discrimination in its hiring practices was likely to have a verdict against Cubbies. Even though the potential loss was not estimable, a verdict against Cubbies was probable, therefore the contingent liability should have been disclosed.…
Once the likelihood of a loss is determined, contingencies are charged against income and a liability is recorded if both of the following conditions are met: 1. Information available before the issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and 2. The amount of the loss can be reasonably estimated (Schroeder, Clark, & Cathey, 2011, p. 370).…
Alpha Investments, Inc., offers to buy Beta Computer Corporation. On May 1, Beta gives Alpha copies of Beta 's financial statements for the previous year. The statements show an inventory of $1 million. On May 15, Beta discovers that the previous year 's inventory is overstated by $500,000, but does not inform Alpha. On June 1, Alpha, relying on the financial statements, buys Beta. On June 10, Alpha discovers the inventory overstatement. In this situation Alpha will succeed in a suit against Beta for fraud?…
2) The purpose of the case is to analyze a situation a real company was in at a point in time and provide a diagnosis and recommendation for action. You should see yourself as a…
When a claim is down coded, reduced, or denied, the general appeals process can be used for challenging the payer’s decision. Patients and providers both have the ability and right to request such an appeal. These appeals have to be filed by a certain time once the claim has been denied or rejected (Valeruis, Bayes, Newby & Seggern, 2008). For example, should a claim be denied for the reason of missing signatures, the claim form has to be corrected with the missing signatures and then resubmitted for the claim to be paid correctly. Billing errors can also be reasons for claim denials or reductions. For example, should a patient visit the physician for an office visit but the insurance company receives a bill for a consult, the provider would receive payment just…