Below are three independent situations. For each determine the proper accounting treatment. Clearly explain your reasoning in complete sentences. If any journal entries should be recorded, prepare them as of 12/31/20. If any footnotes should be prepared, summarize what information would be disclosed in them. a) During 2020, Santiago Inc. became involved in a tax dispute with the IRS. Santiago's attorneys have indicated that they believe it is probable that Santiago will lose this dispute. They also believe that Santiago will have to pay the IRS between $225,000 and $350,000. After the 2020 financial statements were issued, the case was settled with the IRS for $300,000. b) On October 1, 2020 Washington Chemical was identified as a potentially responsible party by the Environmental Protection Agency. Washington Chemical's management and its counsel have concluded that it is probable that Washington will be responsible for damages, and a reasonable estimate of these damages is $1,250,000. Washington Chemical's insurance policy of $2,250,000 has a deductible clause of $125,000. c) Warren Peace Corp. sells cells (mobile phones). They come with a one year warranty that is part of the sales price. They also come with an optional extended two-year warranty that covers defects in the second and third years of each phone's life. On 12/31/2020, Peace sells $100,000 of cell phones. The estimated warranty cost in the first year for each phone is 2% of sales price. Customers purchase extended warranties for these phones on that day for $12,000. During 2020, no actual warranty costs are incurred. Record all necessary journal entries as of 12/31/2020, and indicate what accounts and amounts would be reported on the income statement and the balance sheet for these transactions