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What total amount of provision should recognized on december

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Reference no: EM133108713

Question - Misamis Company provided the following information on December 31, 2020:

In July 2020, the company became involved in a litigation. In December 2020, the court assessed a judgment for P2,400,000 against the company. The entity is appealing the amount of the judgment. The attorneys believed it is probable that the assessment can be reduced on appeal by 50%. The appeal is expected to take at least six months.

In August 2020, Manila City brought action against the company for polluting the Manila Bay with its waste products. It is probable that Manila City will be successful but the amount of damages the entity might have to pay should not exceed P3,000,000.

The company has signed as a guarantor for three separate loans: P1,200,000 loan by BPI to Oriental Company. At this time, there is only a remote likelihood that the company will have to make payment on behalf of Oriental Company.

P250,000 loan by BDO to Long Company. By reason of financial difficulties, it is probable that the company shall pay the P250,000 loan with only a 20% recovery anticipated from Long Company.

P500,000 loan by PNB to Shorty Company. By reason of financial difficulties, it is likely that the company shall pay the P500,000 loan with no recovery anticipated from Long Company.

The company has been sued for patent infringement and lost the case. A preliminary judgment of P300,000 was issued and is under appeal. The company's attorneys agree that it is probable that the company will lose this appeal.

Required - What total amount of provision should be recognized on December 31, 2020?

Reference no: EM133108713

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