ACCT105 Financial Accounting

1.According to the provided case, there has been a long-term legal action between M International (M) and W Inc. (W) regarding the issues of patent infringement. For this reason, W sued M for the issue of patent infringement in May 2007. In 31 December 2007, the management of M reckoned that they would have a major loss for the claim of W. According to their calculation, the amount of loss would be in the range of $15 million to $20 million. In 24 September 2009, the court gave its verdict in the favor of W and this required M to pay a fine of $18.5 million to W. However, it can be seen that M did not sit quiet as they filed a Notice of Appeal with the Court of Appeals in November 2009. The reason was that M did not want to pay $18.5 million to W as it would be a huge loss for their busineness. After that, in December 2010, the Court of Appeal issued a ruling in favor of M that reversed the order of the lower court. Due to this, the Court of Appeals invalidated the order of paying $18.5 million to W. After that, on 6 January 2011, W filed a petition for re-hearing to reverse the order of the Court of Appeals that was turned down on 10 February 2011. On 28 February 2011, the management of M closed the case after having discussions with the in-house legal counsel of the company.

2.The provided case states that Mighty Mufflers Corp. (MMC) is a manufacturer of exhaust system used for the production of new vehicles. It can be seen that there is a decrease in competition in this particular industry. The two major reasons of this decreased competition is effect of economic downturn along with the capital-intensive nature of this particular industry. In 20X1, an investigation was launched against MMC and other two suppliers by the Department of Justice (DOJ) as all the three companies were accused for anticompetitive behavior along with price collusion. At the same time, some of the major customers of these companies also file lawsuits against these companies accusing them for price fixing and over charging the customers due to anticompetitive market. In 20X2, there was a first agreement between the Plaintiffs and MMC. As a result of this agreement, MMC had to pay $20 million and $10 million to their customers. The amount $20 million included $10 million each for due in 20X3 and 20X4. The other $10 million would be given to the customers as a form of 5% rebate on their purchases from the company. The case also states that there is a law firm represents the Plaintiffs. MMC had to pay the fines through that law firm. In addition, MMC was required to pay separate amount to other Plaintiffs and the amount would be determined based on the verdict of Second Settlement. The amount of fine would be determined based on the formula of the Second Settlement.