Reference no: EM132498367

Question 1: On March 1, 2020, Argo Accounting Company borrows $100,000, of which $10,000 is due February 28, 2021. Show how Argo would report the $100,000 debt on its December 31st balance sheet.

Question 2: On September 13, 2020, Argo Electronics sells $180,000 of goods and collects sales tax of 8%. Record the sale.

Question 3: On March 20, 2020, Argo Fabric & Craft Store files all necessary sales tax reports and pays $545 for state and local sales tax for the month of February. Record the sales tax payment.

Question 4:  In 2019, Argo Computer Store had computer sales of $200,000. Each computer comes with a 1-year warranty against manufacturer defects. Argo expects warranty costs to be approximately 3% of sales. Actual warranty expenditures in January 2020 were $550.

a. Record the estimated warranties on December 31, 2019 based on 3% of 2019 sales.

b. Record the payment of the actual warranty expenditures of $550 in January of the following year.

Question 5: Argo Motor Company, a motorcycle manufacturer, had the following contingencies:

a. Argo estimates that it is reasonably possible that it will lose a current lawsuit. Argo's attorneys estimate that the potential loss will be $2,200,000.

b. Argo received notice that it is being sued. Argo is advised by its attorneys that the lawsuit is considered frivolous.

c. Argo is currently the defendant in a lawsuit. Argo believes it is probable that it will lose the lawsuit. Estimated damages to be paid will be between $70,000 - $100,000. Argo's attorneys believe the judge will award the plaintiff approximately $90,000.

d. Argo recently filed a lawsuit against the manufacturer of a brake pedal used in a popular motorcycle sold by Argo, which had to be recalled due to a defective braking system. Argo is seeking damages of $1,500,000. Argo feels confident that it will be awarded the full amount of damages it is seeking.

Determine the appropriate accounting treatment for each of Argo's contingencies.