1.Cougar Corp had $250,000 in sales of Product X in 2020. By December 31st, it had already paid out $5,000 in warranty claims related to 2020 sales of Product X. Management estimates warranty expense will be 5% of total sales for 2020. To close out the period, how much should Cougar Corp add to its warranty liability account for Product X?

Multiple Choice

• $12,500.
• $7,500.
• $2,500.
• $500.

2.On July 15th, 2020, Cougar Corp sued Husky Corp for patent infringement and as of December 31st, 2020, the case has not yet been resolved. Cougar Corp's management estimates that the likelihood of winning the case against Husky Corp is probable and the amount of the gain is reasonably estimable. The journal entry for Cougar Corp to record the contingent gain on December 31st includes a:

Multiple Choice

• Debit to accounts receivable.
• Credit to gain.
• Credit to revenue.
• A contingent gain should not be recorded.

3.When retiring a bond early:

Multiple Choice

• The issuing company will always report a non-operating loss on retirement.
• If the bond is retired for a repurchase price less than its book value a gain on retirement is recorded.
• GAAP has been violated.
• If the bond is retired for a repurchase price less than its book value a loss on retirement is recorded.