Reference no: EM132578452

Question 1: Determine the amount that will be recognized as a liability in each of the following independent cases.

Case 1

In August 2015, the XYZ commenced a suit against DEF for alleged violation of anti-trust laws seeking damages of P2, 000,000. DEF denies the allegations, and as of December 31, 2015, it is not likely that DEF will pay any damages as a result of this lawsuit.

Case 2

In September 2015, the Garrison Company became involved in lawsuit. As a result of this litigation, it is probable that Garrison will have to pay an amount ranging from P700, 000 to P1, 000,000 but P800, 000 is considered to be the best estimate of the obligation.

Case 3

In the latter part of December 2015, Dallas Company's vehicle was involved in a collision with a truck of Kansas Corporation. In January 2016, Kansas filed a suit against Dallas for damages to the vehicle. Based on the police's incident report, it is probable that estimated damages between P300, 000 and P500, 000 will be incurred by Dallas. Each point within that range of amounts is considered as likely as any other point. Dallas issued its 2015 financial statements in March 2016.

Case 4

In the latter part of December 2015, Dallas Company's truck was involved in a collision with a car of Kansas Corporation. In January 2016, Kansas filed a suit against Dallas for damages to the vehicle. Based on the police's incident report, it is probable at December 31, 2015 that estimated damages between P300, 000 and P500, 000 that estimated damages between P300, 000 and P500, 000 will be incurred by Dallas. In February 2016, Kansas accepted Dallas offer of P350, 000 for reimbursement of damages on its car. Dallas issued its 2015 financial statements in March 2016.

Case 5

During 2015, the Going Steady Company sold appliances that offer product warranties against defects. Based on the entity's and industry's experience, it is estimated that 60% of the products sold have no defects, 30% have minor defects and 10% have major defects. Estimated warranty costs were P1, 000,000 if all products sold have major defects and P200, 000 if all products sold have minor defects. Going Steady has already incurred P60, 000 of warranty costs relating to appliances sold during 2015.