The following selected transactions relate to contingencies of Classical Tool Makers, Inc., which began operations in July 2021.Classical's fiscal year ends on December 31. Financial statements are issued in April 2022.1. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience, warranty costs areexpected to approximate 4% of sales. Sales were $2.9 million (all credit) for 2021. Actual warranty expenditures were $51,100 andwere recorded as warranty expense when incurred.2. Although no customer accounts have been shown to be uncollectible, Classical estimates that 1% of credit sales will eventuallyprove uncollectible.3. In December 2021, the state of Tennessee filed suit against Classical, seeking penalties for violations of clean air laws. On January23, 2022, Classical reached a settlement with state authorities to pay $2.4 million in penalties.4. Classical is the plaintiff in a $4.9 million lawsuit filed against a supplier. The suit is in final appeal and attorneys advise that it isvirtually certain that Classical will win the case and be awarded $3.4 million.5. In November 2021, Classical became aware of a design flaw in an industrial saw that poses a potential electrical hazard. A productrecall appears unavoidable. Such an action would likely cost the company $590,000.6. Classical offered $30 cash rebates on a new model of jigsaw. Customers must mail in a proof-of-purchase seal from the packageplus the cash register receipt to receive the rebate. Experience suggests that 65% of the rebates will be claimed. Ten thousand andnine hundred of the jigsaws were sold in 2021. Total rebates to customers in 2021 were $114,000 and were recorded as promotionalexpense when paid.Required:1-a Prepare the year-end entries for any amounts that should be recorded as a result of each of the above contingencies.1-b Indicate whether a disclosure note is needed for the above transactions.Complete this question by entering your answers in the tabs below.Req 1AReq 1BPrepare the year-end entries for any amounts that should be recorded as a result of each of the above contingencies. (If no entry isrequired for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)View transaction listJournal entry worksheet2345>Record any necessary year-end entry related to the warranties.Note: Enter debits before credits.TransactionGeneral JournalDebitCredit1.. .:Record any necessary year-end entry related to uncollectible acts.Note: Enter debits before credits.TransactionGeneral JournalDebitCredit2Recordany necessary year-end entry related to clean air law violations.Note: Enter debits before credits.TransactionGeneral JournalDebitCredit3............ERecord any necessary year-end entry related to the lawsuit filed against asupplier.Note: Enter debits before credits.TransactionGeneral JournalDebitCredit4. .!Record any necessary year-end entry related to a product recall.Note: Enter debits before credits.TransactionGeneral JournalDebitCredit5. .Record any necessary year-end entry related to rebates.Note: Enter debits before credits.TransactionGeneral JournalDebitCredit6CO 1. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience, warranty costs areexpected to approximate 4% of sales. Sales were $2.9 million (all credit) for 2021. Actual warranty expenditures were $51,100 andwere recorded as warranty expense when incurred.2. Although no customer accounts have been shown to be uncollectible, Classical estimates that 1% of credit sales will eventuallyprove uncollectible.3. In December 2021, the state of Tennessee filed suit against Classical, seeking penalties for violations of clean air laws. On January23, 2022, Classical reached a settlement with state authorities to pay $2.4 million in penalties.4. Classical is the plaintiff in a $4.9 million lawsuit filed against a supplier. The suit is in final appeal and attorneys advise that it isvirtually certain that Classical will win the case and be awarded $3.4 million.5. In November 2021, Classical became aware of a design flaw in an industrial saw that poses a potential electrical hazard. A productrecall appears unavoidable. Such an action would likely cost the company $590,000.6. Classical offered $30 cash rebates on a new model of jigsaw. Customers must mail in a proof-of-purchase seal from the packageplus the cash register receipt to receive the rebate. Experience suggests that 65% of the rebates will be claimed. Ten thousand andnine hundred of the jigsaws were sold in 2021. Total rebates to customers in 2021 were $114,000 and were recorded as promotionalexpense when paid.Required:1-a Prepare the year-end entries for any amounts that should be recorded as a result of each of the above contingencies.1-b Indicate whether a disclosure note is needed for the above transactions.Complete this question by entering your answers in the tabs below.Req 1AReq 1BIndicate whether a disclosure note is needed for the above transactions.Event 1Event 2Event 3Event 4Event 5Event 6< Req 1AReq 1B >

Name: The following selected transactions relate to contingencies of Classi
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Description: The following selected transactions relate to contingencies of Classical Tool Makers, Inc., which began operations in July 2021.Classical's fiscal year ends on December 31. Financial statements are issued in April 2022.1. Classical's products carry

The liability that may or may not have the potential to take place due to unpredictable future event…

Business

Accounting

Required: 1-a Prepare the year-end entries for any amounts that should be recorded as a result of each of the above contingencies. 1-b Indicate whether a disclosure note is needed for the above transactions.

Required: 1-a Prepare the year-end entries for any amounts that should be recorded as a result of each of the above contingencies. 1-b Indicate whether a disclosure note is needed for the above transactions.

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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