Reeves Co. filed suit against Higgins, Inc., seeking damages for copyright violations. Higgins' legal counsel believes it is pro
bable that Higgins will settle the lawsuit for an estimated amount in the range of $170,000 to $270,000, with all amounts in the range considered equally likely. How should Higgins report this litigation?
As a liability for $170,000 with disclosure of the range.
As a disclosure only. No liability is reported.
As a liability for $270,000 with disclosure of the range.
As a liability for $220,000 with disclosure of the range.
As a liability for $170,000 with disclosure of the range.
As a disclosure only. No liability is reported.
As a liability for $270,000 with disclosure of the range.
As a liability for $220,000 with disclosure of the range.
1 answer:
You might be interested in
Answer: Option (c) is correct.
Explanation:
Given that,
EPS = $3.50
Book value per share = $22.75
Shares outstanding = 220,000
Debt-to-assets ratio = 46%
Total Equity (Book Value) = Book value per share × Shares outstanding
= $22.75 × 220,000
= $5,005,000
Total Assets =
=
= $9,268,518.52
Debt outstanding = Total Assets - Total Equity
= $9,268,518.52 - $5,005,000
= $4,263,518.52
= $4,263,519 (approx)