$7\mathrm{.}1$ MusclePro's Lawsuit MusclePro is a $($fictional$)$ public company engaged in selling protein

powders and other performance$-$enhancing supplements. In $20$X$2,$ MusclePro was sued by a

supplier alleging that MusclePro did not pay invoices for services received and seeking $$8\mathrm{.}2$

million in damages. At $12/31/$X$2,$ MusclePro included an estimated loss of $$2$ million in its year$-$

end financial statements. During Q$220$X$3,$ MusclePro entered a settlement agreement,

whereby MusclePro agreed to settle the supplier's claims by paying $$3$ million in installments,

as follows: $$1$ million to be paid at $\frac{12}{31}\frac{?}{x3},$$$1$ million at $\frac{12}{31}\frac{?}{x4},$ and $$1$ million at

$\frac{12}{31}\frac{?}{x5}.$ MusclePro is rated BBB by Fitch throughout this multi$-$year period. Assume you are

on the accounting team for MusclePro. Describe the following:

How did MusclePro initially record its estimated loss as of $\frac{12}{31}\frac{?}{x2}?$

What entry is required at $\frac{6}{30}\frac{?}{x3}$ to reflect signature of the settlement agreement in

MusclePro's quarterly financial statements?

What entries are required at $\frac{12}{31}\frac{?}{x3},\frac{12}{31}\frac{?}{x4},$ and $\frac{12}{31}\frac{?}{x5}?$

In what financial statement line item should the activity related to this agreement

appear?

What disclosures is MusclePro required to make surrounding this claim and agreement?

For each of the preceding issues, provide Codification references supporting your conclusions.