Question

The 16-Bit Corporation, whose December 31, 2019 year-end financial statements were issued February 16, 2020, had the following transactions.  

For each transaction, indicate the amount that 16-Bit would show as a current liability on its December 31, 2019 balance sheet under US GAAP.

Indicate $ “0” if no amount would be shown as a current liability.  

On November 17, 2019, 16-Bit was awarded damages of $500,000 by a court related to a patent infringement lawsuit it had filed in 2016. At December 31, 2019, the final outcome of this case was awaiting appeal and was, therefore, uncertain. However, in the opinion of 16-Bit’s attorney, the appeal will be denied and 16-bit will receive $500,000 within the next year.

Answer 1

Current liabilities are the amount payable by company to third party within one year from balance sheet date. In this case company would be receiving reward of $500,000 and there is no amount to be paid by company to others. This amount is therefore generally reported as assets and not liabilities.

Thus,current liabilities for this transaction would be $0.