6. Eastern Company provided the following information on December 31, 2020. In May 2020, Eastern Company became involved in litigation. In December 2020, the court assessed a judgment for P1,600,000 against Eastern Company. The entity is appealing the amount of the judgment. The attorneys believed it is probable that the assessment can be reduced on appeal by 50%. The appeal is expected to take at least a year. In July 2020, Pasig City brought action against Eastern Company for polluting the Pasig River with its waste products. It is probable that Pasig City will be successful but the amount of damages the entity might have to pay should not exceed P1,500,000. Eastern Company has signed as guarantor for a P1,000,000 loan by First Bank to Northern Company, a principal supplier to Eastern Company. Eastern Company has long owned a manufacturing site that has now been discovered to be contaminated with toxic waste. The entity has acknowledged its responsibility for the contamination. An initial clean up feasibility study has shown that it will cost at least P500,000 to clean up the toxic waste. Eastern Company has been sued for patent infringement and lost the case. A preliminary judgment of P300,000 was issued and is under appeal. The entity's attorneys agree that it is probable that the entity will lose this appeal. Required: Prepare journal entries to recognize any provision at the end of current year. 7. On January 1, 2020, Mariel Company issued bonds payable with face amount of P8,000,000 and 10% stated interest rate at 95. The entity paid bond issue cost of P150,000. The bonds have a 5-year term and interest is payable annually every December 31. The entity elected the fair value option. On December 31, 2020, the fair value of the bonds is 105. It is reliably determined that the fair value increase comprised P150,000 attributable to credit risk and the remainder attributable to change in the market interest rate. 1. What is the interest expense for 2020? 2. What amount of gain or loss should be recognized in profit or loss for 2020 to conform with the fair value option? 3. What is the carrying amount of the bonds payable on December 31, 2020? 4. Prepare journal entries for 2020.