Midtown Mocha and Janes Java, a competitor of Midtown Mocha, have been involved in long-standing litigation over a patent infringement matter.

Below is a summary timeline of specific events that have taken place related to this matter:

In May 2020, Janes Java filed a claim against Midtown Mocha for patent infringement. For the year ended December 31, 2020, management of Midtown Mocha determined that a loss for this matter was probable and represented that the estimate of the loss was in the range of $18 million to $24 million, with $20 million being the most likely amount of loss within the range. A jury trial took place in September 2022. The jury reached a verdict on September 24, 2022, and a judgment was ordered in favor of Janes Java. The judgment required Midtown Mocha to pay Janes Java. $21 million. In November 2022, Midtown Mocha filed a Notice of Appeal with the Court of Appeals. In December 2023, the Court of Appeals issued a ruling in favor of Midtown Mocha, Incs appeal and reversed the lower courts ruling on the matter. This meant that the Court of Appeals overturned the jury verdict and the $18.5 million judgment against Midtown Mocha. On January 6, 2024, Janes Java filed a petition for a re-hearing before the same panel of appellate judges against the reversal of ruling by Court of Appeals.

Required:

1. Introduce the case by providing a summary of the facts and issues that are presented related to Midtown Mocha and Janes Java. 2. Locate the appropriate section(s) in the FASB Accounting Standards Codification that provides guidance on reporting for Contingencies and Loss Contingencies. 3. For the year ended December 31, 2020, financial statements, what amount should Midtown Mocha record as a liability? Be sure to appropriately cite the relevant section(s) of the Codification and interpret the guidance to support your response. 4. For the year-ended December 31, 2022, financial statements, should Midtown Mocha adjust its liability? If so, what amount should be recorded; and should the amount of the adjustment be considered a 2022 event or a period adjustment? Be sure to appropriately cite the relevant section(s) of the Codification and interpret the guidance to support your response.