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Ultimate Company is a defendant in a lawsuit alleging damages of $3 billion. The litigation is expected to continue for several years, and no reasonable estimate can be made at this time of Ultimate Company's ultimate financial responsibility. This situation is an example of:

A. Off-balance-sheet financing.
B. A loss contingency which should be disclosed in notes to Ultimate Company's financial statements.
C. An estimated liability which must appear in Ultimate Company's balance sheet.
D. A loss in purchasing power caused by inflation.

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https://brainmass.com/business/contingencies/company-lawsuits-555528

Solution Preview

Ultimate Company is a defendant in a lawsuit alleging damages of $3 billion. The litigation is expected to continue for several years, and no reasonable estimate can be made at this time of Ultimate Company's ultimate financial responsibility. This situation is an example of:

A. Off-balance-sheet financing.
***B. A loss ...

Solution Summary

The off-balance sheet financing for loss contingency discloses are examined. The estimates liability for caused inflation are given.

$2.19
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Describe how Calliope's accounts and financial statements will be affected by the following possible outcomes of the lawsuit.

Your assignment is to write a 300-word e-mail memo to Jan describing how Calliope's accounts and financial statements will be affected by the following possible outcomes of the lawsuit. Your e-mail should answer the following questions:

? If Calliope's legal department thinks it is probable that the company will be found liable on the lawsuit, and the amount the company will be liable for can be reasonably estimated at $100,000, how should this item be treated in Calliope's accounts and financial statements.
? If Calliope's legal department thinks it is probable that Calliope will be found liable on the lawsuit, but cannot reasonably estimate the amount of damages that Calliope will be liable for, how should this item be treated in the Calliope's accounts and financial statements.
? If Calliope's legal department thinks it is reasonably possible that the company will be found liable on the lawsuit, but cannot reasonably estimate the amount of damages that Calliope will be liable for, how should this item be treated in Calliope's accounts and financial statements.
? If Calliope's legal department thinks it is remote that the company will be found liable on the lawsuit, how should this item be treated in Calliope's accounts and financial statements?

See attached file for full problem description.

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