Reference no: EM132651345

Question -

(a) On November 5, 2020, a Bruck Company truck was in an accident with an auto driven by Cling. The entity received notice on January 12, 2021 of a lawsuit for $700,000 damages for personal injuries suffered by Bell. The entity's counsel believed it is probable that Cling will be awarded an estimated amount in the range between $200,000 and $500,000. The possible outcomes are equally likely. The accounting year ends on December 31 and the 2020 financial statements were issued on March 31, 2021. What amount of provision should be accrued on December 31, 2020?

(b) During the current year, Razor Company won a litigation award for $1,500,000 which was tripled to $4,500,000 to include punitive damages. The defendant, who is financially stable, has appealed only the $3,000,000 punitive damages. The entity was awarded $5,000,000 in an unrelated suit it filed, which is being appealed by the defendant. Counsel is unable to estimate the outcome of these appeals. What amount of pretax gain should be reported?

(c) On January 1, 2020 SAM Co. acquired a machine from PLT CO. In lieu of cash payment, SAM gave PLT a 3-year $600,000, noninterest-bearing notes payable. Principal is due on December 31, 20X2 but interest is due annually every December 31. The prevailing interest rate for this type of note is 10%. How much is the amount that should be recorded as a liability on December 31, 20X0

(d) On January 1, 2020, SAM acquire a machine from PLT Co. In lieu of cash payment PLT gave SAM a 3-year $600,000 noninterest-bearing notes payable. Principal is due in equal payment every December 31, beginning on December 31, 2020. Compute for the interest expense that should be recognized on December 31, 2020.

(e) On January 1, 2020 SUNG acquired inventory with a list price of $800,000 and a cash price of $497,380 by issuing 3-year $600,000 noninterest-bearing note payable. Principal is due in equal payments every December 31 beginning on December 31, 2020. The effective rate of interest interpolated for the cash price is 10%. Compute for the carrying amount of the note on initial recognition.

(f) On January 1, 020, UBP Co. borrowed 10% $2,500,000 five-year loan from IPR Bank. Interests are payable annually starting December 31, 2020. National charges 5% non-refundable loan origination fee representing service fee. Compute for the loan payable to be presented on December 31, 2020.

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