Use the information for the next two (2) questions. During 2020, Wasp Company 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 P200,000 and an 80% chance that the entity will be required to pay damages of P100,000. 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 5% per year. The present value of 1 at 5% for one period is 0.95 and for two periods is 0.91.

What is the amount of undiscounted cash flows for the provision?

Use the information for the next two (2) questions. On December 31, 2020, Resistance Company reported the following liabilities:

The 9% note payable is noncancelable and matures on July 31, 2021. Sufficient cash is expected to be available to retire the note at maturity.

The 8% note payable matures on May 31, 2026 but the creditor has the option of calling the note or demanding payment on June 30, 2021. However, the call option is not expected to be exercised given the prevailing market condition.

The 10% note payable is due on March 31, 2022. A debt covenant requires Resistance Company to maintain current assets at least equal to 150% of current liabilities. On December 31, 2020, Resistance Company obtained a waiver from the creditor until June 2021 having convinced the creditor that Resistance’s normal 2 to 1 ratio of current assets to current liabilities will be re-established during the first half of 2021.

The 11% note payable matures on June 30, 2021. On January 31, 2021 before the issuance of the 2020 financial statements, the note payable was refinanced on a long-term basis.

What amount should be reported as current liabilities?

What amount should be reported as noncurrent liabilities?

Use the information for the next four (4) questions.ZXCVBNM Company has an agreement to pay the sales manager a bonus of 5% of the entity’s earnings. The income for the year before bonus and tax is P7,875,000 The income tax rate is 30% of income after bonus.

A.) How much is the bonus, assuming bonus is a certain percent of the income before bonus and before tax?

B.) How much is the bonus, assuming bonus is a certain percent of income after bonus but before tax?

C.) How much is the bonus, assuming bonus is a certain percent of income after bonus and after tax?

D.) How much is the bonus, assuming bonus is a certain percent of income after tax but before bonus?

Use the information for the next four (4) questions. Lalala Company has an agreement to pay the sales manager a bonus of 5% of the entity’s earnings. The income for the year before bonus and tax is P7,875,000 The income tax rate is 30% of income after bonus.

How much is the bonus, assuming bonus is a certain percent of the income before bonus and before tax?

How much is the bonus, assuming bonus is a certain percent of income after bonus but before tax?

How much is the bonus, assuming bonus is a certain percent of income after bonus and after tax?

How much is the bonus, assuming bonus is a certain percent of income after tax but before bonus?

Use the information for the next four (4) questions. QWERTY Company has an agreement to pay the sales manager a bonus of 5% of the entity’s earnings. The income for the year before bonus and tax is P7,875,000 The income tax rate is 30% of income after bonus.

1.How much is the bonus, assuming bonus is a certain percent of the income before bonus and before tax?

2.How much is the bonus, assuming bonus is a certain percent of income after bonus but before tax?

3.How much is the bonus, assuming bonus is a certain percent of income after bonus and after tax?

4.How much is the bonus, assuming bonus is a certain percent of income after tax but before bonus?

Use the information for the next four (4) questions. XYZ Company has an agreement to pay the sales manager a bonus of 5% of the entity’s earnings. The income for the year before bonus and tax is P7,875,000 The income tax rate is 30% of income after bonus.

How much is the bonus, assuming bonus is a certain percent of the income before bonus and before tax?

How much is the bonus, assuming bonus is a certain percent of income after bonus but before tax?

How much is the bonus, assuming bonus is a certain percent of income after bonus and after tax?

How much is the bonus, assuming bonus is a certain percent of income after tax but before bonus?

Use the information for the next two (2) questions. On November 25, 2020, an explosion occurred at a War Machine Company plant causing extensive property damage to area buildings. By March 10, 2021, claims had been asserted against War Machine. The management and counsel concluded that it is possible War Machine will be responsible for damages, and that P3,500,000 would be a reasonable estimate of the liability.

The entity’s P10,000,000 comprehensive public liability policy has a P500,000 deductible clause. The financial statements for 2020 were issued on March 25, 2021.

What amount of loss from lawsuit should be reported in the income statement for 2020?

What amount of liability from lawsuit should be reported on December 31, 2020?