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Problem 1: During 2020, Mayan Company guaranteed a supplier's P750,000 loan from a bank. On October 1, 2020, the entity was notified that the supplier had defaulted on the loan and file for bankruptcy protection. Counsel believed the entity will probably have to pay P375,000 under its guarantee. As a result of the supplier's bankruptcy, the entity entered into a contract in December 2020 to retool its machines so that the entity could accept parts from other suppliers. Retooling costs are estimated to be P450,000.What amount should be reported as accrued liability on December 31, 2020?
A. 450,000B. 1,125,000C. 375,000D. 750,000
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