Reference no: EM133186035
Questions -
Q1. An entity is the defendant in a patent infringement lawsuit. The entity's lawyers believe there is a 30% chance that the court will dismiss the case and the entity will incur no outflow of economic benefits. However, if the court rules in favor of the claimant, the lawyers believe that there is a 20% chance that the entity will be required to pay damages of P800,000 (the amount sought by the claimant) and an 80% chance that the entity will be required to pay damages of P400,000 (the amount that was recently awarded by the same judge in a similar case). Other outcomes are unlikely. The court is expected to rule in late December 2022. There is no indication that the claimant will settle out of court. A 7% risk adjustment factor to the probability-weighted expected cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An appropriate discount rate is 10% per year.
How much is the provision for lawsuit at December 31, 2021?
Q2. At its meeting on December 1, 2021, the board of directors of ABC Co. declares a cash dividend of P2 per share, payable on February 1, 2022 to shareholders of record on December 25, 2021. The following are the ordinary shares outstanding on different dates:
December 1, 2021 - 40,000 shares
December 25, 2021 - 50,000 shares
December 31, 2021 - 55,000 shares
February 1, 2022 - 60,000 shares
On December 31, 2021, what is the amount of dividend payable that should be recognized in the statement of financial position?