Hi there I need help with this assignment for Intermediate Financial Accounting 2. The topic is current liabilities and contingencies. Thanks!

Question 1 (13 marks) Rogo Manufacturing provides warranties with the products that it sells. At December 31, 2014, the company's warranty provision amounted to $640,000. During 2015, sales of products to which warranties were provided totalled $10 million. The company estimated that warranty costs would amount to 2% of the sales amount. During the year, the company spent $480,000 on warranty costs. Required (4 marks): What amount should be recorded as warranty expense for 2015 by the company? What warranty provision should be included in the company's statement of financial position as at December 31, 2015? On December 1, 2015, Bleck Corporation was sued by a competitor for patent infringement. The competitor sought damages of $1,500,000. On the advice of legal counsel, Bleck has offered $200,000 to settle the lawsuit. It is unknown whether the settlement offer will be accepted. Bleck's legal counsel estimates that if the matter goes to court, the competitor has a 60% probability of success, and that if successful, will be awarded between $600,000 and $800,000, with all payouts in this range being equally likely. Required (2 marks): What provision(s) should Bleck Corporation make for this matter in its statement of financial position as at December 31, 2015? Leopard Inc. issued a $30,000, 30-day, zero-interest bearing note to Lion's Den for office furniture. The market rate of interest for similar transactions is 2% per annum. Required (2 marks): Prepare the required journal entry for this transaction. Brazilian Magazines sells subscriptions to the magazine that they publish. Subscriptions are for one-year (12 monthly) or two-year (24 monthly) issues of the magazine. One-year subscriptions are sold for $24 and two-year subscriptions are sold for $50. Each subscription begins in the month that it is received. The cost of producing each magazine is currently $3. The cost is expected to increase to $4 in 2016 and to increase to $5 in 2017. During 2015, the company's first year of operations, the company sold 300 one-year subscriptions and 100 two-year subscriptions. Subscriptions sales occurred evenly over the year. Required (5 marks): In Brazilian Magazines' December 31, 2015 statement of financial position, how much should be shown as unearned revenue from magazine subscriptions, under current liabilities, for the oneyear subscriptions? In Brazilian Magazines' December 31, 2015 statement of financial position, how much should be shown as unearned revenue from magazine subscriptions, for the two-year subscriptions? Clearly show how much, if any, should be included in current liabilities and how much, if any, should be included in non-current liabilities. ***** Question 2 (15 marks) On July 1, 2012, Piton Productions Limited issued $6,000,000 face value of 4% ten-year bonds with interest paid at June 30 and December 31 each year. The bonds were issued to yield 5%. The company can call the all or any part of the outstanding bonds immediately after payment of interest by paying face value plus a call premium of 4%. Due to an increase in interest rates, these bonds were selling in the market at the end of June 2014 to yield an effective rate of 6%. Because Piton Productions Limited had extra cash, the company purchased $1,000,000 face amount of the bonds in the market and retired them on July 1, 2014. Required: What entry would Piton Productions Limited make to record issuance of the bonds on July 1, 2012? What entry would Piton Productions Limited make to record payment of the first interest payment on December 31, 2012? What amount would Piton Productions Limited report as bonds payable in its statement of financial position as at December 31, 2012? What entry would Piton Productions Limited make to record its purchase and retirement of part of the debt on July 1, 2014? Would it have been advantageous for Piton Productions Limited to call the bonds instead of purchasing them in the market? Why or why not? If a gain or loss arose on the repurchase and retirement of the bonds, should this be shown in net income, other comprehensive income or taken directly to contributed surplus or retained earnings? Why? ***** Question 3 (6 marks) Archer's Inc. is relocating its office space from the space currently occupied on Hemlock Street to new premises on Columbia Street on January 1, 2016. There are two years remaining on the lease on the Hemlock Street offices. Quarterly lease payments are $10,000 per quarter paid at the beginning of each quarter. Archer's can sublease the space to another company for $8,000 per quarter beginning on January 1, 2016. Alternatively, Archer's Inc. could cancel the lease by paying the lease cancellation penalty of $20,000. The current market interest rate is 8%. Archer's accounts for the lease as an operating lease. Required: What journal entry, if any, should Archer's Inc. make with respect to the Hemlock Street lease when preparing its financial statements at December 31, 2015? Betachem Corporation has been sued for $1,000,000 for product liability by Omicron Industries Inc. who allege $1,000,000 of losses were caused by defective chemicals supplied to Omicron during 2015. Betachem's lawyers believe that there is a 70% likelihood that the company will lose the case. The lawyer's believe that the damages assessed by the court would probably be about $600,000 to $800,000 with any amount in that range equally probable. The case is expected to come to trial in mid-2016. Required: What journal entry, if any, should Betachem Corporation make with respect to this matter in their December 31, 2015, financial statements? Assume that Omicron Industries lawyers are of the same opinion with respect to the case as Betachem's lawyers. What journal entry, if any, should Omicron Industries make with respect to this matter in their December 31, 2015, financial statements? ***** Question 4 (16 marks) Rossico Inc., a Canadian public company, is preparing its June 30, 2015 financial statements and must determine the appropriate accounting treatment and/or disclosure for each of the following unrelated items. On July 1, 2014, Rossico cancelled its insurance coverage for its fleet of vehicles, deciding to self-insure against collision, fire, theft, and other risks. Actual losses during the year ended June 30, 2015, amounted to $80,000. The company's previous insurer had quoted a cost of $140,000 for coverage for the year. The company's controller wants to record a provision for claims in future years of $60,000, debiting vehicle expense. The company has been sued for consequential damages resulting from a customer's use of a tainted product purchased from Rossico. The company's attorneys believe that the customer's claim has about a 75% likelihood of succeeding, and if so, the court would award damages estimated to range between $450,000 and $550,000, with all figures in that range being equally likely. The following balances are taken from the company's trial balance at June 30, 2015: GST Recoverable (input tax credits) Dr $37,486 GST Payable (from sales) Cr $78,591 PST Payable (from sales) Cr $54,231 Rossico has a term bank loan in the amount of $1,200,000 due on September 30, 2015. The company had been in negotiation with their bankers with respect to renewing all or part of the loan. On July 15, 2015, an agreement was reached with the bank to extend the loan for a further five years. Required: For each item set out above, describe the disclosure necessary in the company's June 30, 2015 financial statements, including the notes thereto. Where possible provide the amounts that would be disclosed. For each situation, state how your answer would change if the company reported under the Canadian Accounting Standards for Private Enterprise (ASPE). END OF ASSIGNMENT