What is the undiscounted provision before risk adjustment

Assignment Help Accounting Basics
Reference no: EM133169898

Question - During 2022, an entity is the defendant in a patent infringement lawsuit. The lawyers believe that 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 the damages of P100,000 and 80% chance that the entity will be required to pay damages of P200,000.00. Other outcomes are unlikely.

The court is expected to rule in late December 2023. 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 estimate. An appropriate discount rate is 5% per year. The present value of 1 at 5% for one period is 0.95.

What is the undiscounted provision before risk adjustment?

What amount should be reported as provision for lawsuit on December 31, 2022?

Reference no: EM133169898

Questions Cloud

Describe what communications will take place : Describe what communications will take place during the building surveying component of the project, between you and your client
What amount should be reported as monetary liability : Budoy Company reported the following assets and liabilities at year end: In a hyperinflationary economy, what amount should be reported as monetary liability
What the total assets after adjusting for hyperinflation : The noncurrent liabilities were a loan raised on March 31, 2011. What the total assets after adjusting for hyperinflation
Calculate lessee lease liability for the initial recognition : The expected residual value of the leased equipment at the end of the lease term is 3,000. Calculate lessee lease liability for the initial recognition
What is the undiscounted provision before risk adjustment : An appropriate discount rate is 5% per year. The present value of 1 at 5% for one period is 0.95. What is the undiscounted provision before risk adjustment
Implement several different practical configurations : Implement several different practical configurations of the operational amplifier. First we simulate the different configurations for the operational amplifier
Calculate the overhead rates for each activity : Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: Calculate the overhead rates for each activity
Prepare the january journal entry : Hillside issues $2,800,000 of 8%, 15-year bonds dated January 1, 2021, that pay interest semi-annually on June 30. Prepare the January journal entry
What new amount of depreciation expense will bb inc record : The salvage value is revised from $2,000 to $1,000. What new amount of depreciation expense will BB Inc. record for 2023

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd