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Unformatted text preview: Requirement 3 A $3 million liability should be reported in its 2012 balance sheet. Requirement 4 The journal entry is as follows: Loss 3,000,000 Liability for Product Recall 3,000,000 (Record the loss contingency) Exercise 8-14 Requirement 1 Yes, its probable that costs for warranties will be incurred and based on previous experience the company can reasonably estimate the amount. Requirement 2 Warranty Expense ($500,000 x 5%) 25,000 Estimated Warranty Liability 25,000 (Loss contingency for warranties) Requirement 3 Estimated Warranty Liability 18,000 Cash 18,000 (Actual warranty expenditures) Requirement 4 Estimated Warranty Liability Payment 18,000 25,000 Expense 7,000 Balance...
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- Spring '08