I have attached the questions PA6. LO 12.3 Machine Corp. has several pending lawsuits against its company. Review each situation and (1) determine thetreatment for each situation as probable and estimable, probable and inestimable, reasonably possible, or remote; (2)determine what, if any, recognition or note disclosure is required; and (3) prepare any journal entries required to recognize acontingent liability.A. A pending lawsuit, claiming $100,000 in damages, is considered likely to favor the plaintiff and can be reasonablyestimated.B. Machine Corp. believes there might be other potential lawsuits about this faulty machinery, but this is unlikely to occur.C. A claimant sues Machine Corp. for damages, from a dishonored service contract agreement; the plaintiff will likely winthe case but damages cannot be reasonably estimated.D. Machine Corp. believes a customer will win a lawsuit it filed, but the outcome is not likely and is not remote. It is possiblethe customer will win.PA7. LO 12.3 Emperor Pool Services provides pool cleaning and maintenance services to residential clients. It offers a one-year warranty on all services. Review each of the transactions, and prepare any necessary journal entries for each situation.A. March 31: Emperor provides cleaning services for fifteen pools during the month of March at a sales price per pool of$550 cash. Emperor records warranty estimates when sales are recognized and bases warranty estimates on 2% ofsales.B. April 5: A customer files a warranty claim that Emperor honors in the amount of $100 cash.C. April 13: Another customer, J. Jones, files a warranty claim that Emperor does not honor due to customer negligence.D. June 8: J. Jones files a lawsuit requesting damages related to the dishonored warranty in the amount of $1,500. Emperordetermines that the lawsuit is likely to end in the plaintiff's favor and the $1,500 is a reasonable estimate for damages. EA6. LO 12.2 Elegant Electronics sells a cellular phone on September 2 for $450. On September 6, Elegant sells anothercellular phone for $500. Sales tax is computed at 3.5% of the total sale. Prepare journal entries for each sale, including salestax, and the remittance of all sales tax to the tax board on October 23.EA7. LO 12.2 Homeland Plus specializes in home goods and accessories. In order for the company to expand its business, thecompany takes out a long-term loan in the amount of $650,000. Assume that any loans are created on January 1. The terms ofthe loan include a periodic payment plan, where interest payments are accumulated each year but are only computed againstthe outstanding principal balance during that current period. The annual interest rate is 8.5%. Each year on December 31, thecompany pays down the principal balance by $80,000. This payment is considered part of the outstanding principal balancewhen computing the interest accumulation that also occurs on December 31 of that year.A. Determine the outstanding principal balance on December 31 of the first year that is computed for interest.B. Compute the interest accrued on December 31 of the first year.C. Make a journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year.

“Since you have asked multiple questions, we will solve the first question for you. If you want any specific question to be solved then please specify the question number or post only that question.” Contingent liabilities are those which may or may not occur depending upon a future event.A. The contingent liability is more likely to occur than not and the amount can be reasonably estimated. Therefore, the contingent liability is “Probable and estimable”. Since the contingent liability is probable and reasonable; a provision is required to be created. Journal Entry: B. Since the contingent liabilities are unlikely to occur; therefore, the probability of occurrence would be “remote”. These contingent liabilities would be ignored and hence no accounting treatment would be required. C. Since the contingent liability is more likely to occur than not, but the amount cannot be reasonably estimated. Therefore, the contingent liability is “probable and inestimable”. A note disclosure would be required to provide the details of the contingent liability. D. Since the contingent liability is less likely to occur but is not remote; therefore, the contingent liability is “reasonably possible”. A note disclosure would be required, to provide the information of the contingent liability, which is available.

Business

Accounting

PA6. LO 12.3 Machine Corp. has several pending lawsuits against its company. Review each situation and (1) determine the treatment for each situation as probable and estimable, probable and inestimable, reasonably possible, or remote; (2) determine what, if any, recognition or note disclosure is required; and (3) prepare any journal entries required to recognize a contingent liability. A. A pending lawsuit, claiming $100,000 in damages, is considered likely to favor the plaintiff and can be reasonably estimated. B. Machine Corp. believes there might be other potential lawsuits about this faulty machinery, but this is unlikely to occur. C. A claimant sues Machine Corp. for damages, from a dishonored service contract agreement; the plaintiff will likely win the case but damages cannot be reasonably estimated. D. Machine Corp. believes a customer will win a lawsuit it filed, but the outcome is not likely and is not remote. It is possible the customer will win.

PA6. LO 12.3 Machine Corp. has several pending lawsuits against its company. Review each situation and (1) determine the treatment for each situation as probable and estimable, probable and inestimable, reasonably possible, or remote; (2) determine what, if any, recognition or note disclosure is required; and (3) prepare any journal entries required to recognize a contingent liability. A. A pending lawsuit, claiming $100,000 in damages, is considered likely to favor the plaintiff and can be reasonably estimated. B. Machine Corp. believes there might be other potential lawsuits about this faulty machinery, but this is unlikely to occur. C. A claimant sues Machine Corp. for damages, from a dishonored service contract agreement; the plaintiff will likely win the case but damages cannot be reasonably estimated. D. Machine Corp. believes a customer will win a lawsuit it filed, but the outcome is not likely and is not remote. It is possible the customer will win.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

I have attached the questions

PA6. LO 12.3 Machine Corp. has several pending lawsuits against its company. Review each situation and (1) determine the
treatment for each situation as probable and estimable, probable and inestimable, reasonably possible, or remote; (2)
determine what, if any, recognition or note disclosure is required; and (3) prepare any journal entries required to recognize a
contingent liability.
A. A pending lawsuit, claiming $100,000 in damages, is considered likely to favor the plaintiff and can be reasonably
estimated.
B. Machine Corp. believes there might be other potential lawsuits about this faulty machinery, but this is unlikely to occur.
C. A claimant sues Machine Corp. for damages, from a dishonored service contract agreement; the plaintiff will likely win
the case but damages cannot be reasonably estimated.
D. Machine Corp. believes a customer will win a lawsuit it filed, but the outcome is not likely and is not remote. It is possible
the customer will win.
PA7. LO 12.3 Emperor Pool Services provides pool cleaning and maintenance services to residential clients. It offers a one-
year warranty on all services. Review each of the transactions, and prepare any necessary journal entries for each situation.
A. March 31: Emperor provides cleaning services for fifteen pools during the month of March at a sales price per pool of
$550 cash. Emperor records warranty estimates when sales are recognized and bases warranty estimates on 2% of
sales.
B. April 5: A customer files a warranty claim that Emperor honors in the amount of $100 cash.
C. April 13: Another customer, J. Jones, files a warranty claim that Emperor does not honor due to customer negligence.
D. June 8: J. Jones files a lawsuit requesting damages related to the dishonored warranty in the amount of $1,500. Emperor
determines that the lawsuit is likely to end in the plaintiff's favor and the $1,500 is a reasonable estimate for damages.

EA6. LO 12.2 Elegant Electronics sells a cellular phone on September 2 for $450. On September 6, Elegant sells another
cellular phone for $500. Sales tax is computed at 3.5% of the total sale. Prepare journal entries for each sale, including sales
tax, and the remittance of all sales tax to the tax board on October 23.
EA7. LO 12.2 Homeland Plus specializes in home goods and accessories. In order for the company to expand its business, the
company takes out a long-term loan in the amount of $650,000. Assume that any loans are created on January 1. The terms of
the loan include a periodic payment plan, where interest payments are accumulated each year but are only computed against
the outstanding principal balance during that current period. The annual interest rate is 8.5%. Each year on December 31, the
company pays down the principal balance by $80,000. This payment is considered part of the outstanding principal balance
when computing the interest accumulation that also occurs on December 31 of that year.
A. Determine the outstanding principal balance on December 31 of the first year that is computed for interest.
B. Compute the interest accrued on December 31 of the first year.
C. Make a journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year.

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