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The following three Independent sets of facts relate to contingent liabilities: 1. In November of the current year, an automobile manufacturing company recalled all pickup trucks manufactured during the past two years. A flaw in the battery cable was discovered and the recall provides for replacement of the defective cables. The estimated cost of this recall is $3.8 million. 2. The EPA has notified a company of violations of environmental laws relating to hazardous waste. These actions seek cleanup costs. penalties, and damages to property. The company is reasonably certain there will be cost associated with the cleanup, but cannot estimate the amount. The cleanup cost could be as high as $4,180,000 or as little as $680,000 and Insurance could relmburse all or part of the cost. There is no way to more accurately estimate the cost to the company at this time. 3. Holland Company does not carry property damage Insurance because of the cost. The company has suffered substantial losses each of the past three years. However, it has had no losses for the current year. Management thinks this is too good to be true and 15 sure there will be significant losses in the coming year. However, the exact amount cannot be determined Required a. What are three categories of contingent liabilities? Contingent liabilities None of the above Payroll liabilities Probable and can be reasonably estimated Probable but cannot be reasonably estimated Required a. What are three categorles of contingent liabilities? Payroll liabilities Probable and can be reasonably estimated Probable but cannot be reasonably estimated Real liabilities Remote possibility b. For each item in the preceding list, determine the correct accounting treatment. Prepare any required journal entries. (If no entry is required for a transaction/event, select "No Journal entry required" In the first account field.) View transaction list Journal entry worksheet BC Record the warranty expense for event 1. Note: Enter debits before credits Event General Journal Debit Credit Record entry -- = Clear entry View general journal No journal entry required Accounts payable the Accounts receivable Accumulated depreciation Ir det Allowance for doubtful accounts Cash . Common stock Cost of goods sold Depreciation expense Discount on notes payable Dividends mmmmmm LLLLLLLLLLLLLLLLLLLLL CELLULLLLLLLLLL ntry worksheet Employee income tax payable Employee income tax payable Employee medical insurance expense Employee medical insurance payable Employee pension expense Employee pension payable Employee savings plan Equipment Federal unemployment tax payable FICA tax - Medicare payable FICA tax - SS payable mmmmmmmmmm Fine Fine payable Interest expense Interest payable Interest receivable Interest revenue mmmmmmmmmm Land the Merchandise inventory Miscellaneous sales Notes payable Notes receivable It um Debi LLLLL Operating expenses Payroll tax expense Premium on notes payable Prepaid rent Retained earnings HIRE IEEE ELE RE Salaries expense Salaris payable Sales revenue Sales tax payable State income tax payable State unemployment tax payable LLLLLLL Supplies he Uncollectible accounts expense Unearned revenue Vacation pay expense Vacation pay payable Warranty expense FALU Unearned revenue Vacation pay expense Vacation pay payable Warranty expense Warranty payable LLLLLLLmmmmmmmmmm De ULUS........ Record the warranty expense for event 1. B Record the fines associated with the violations of environmental laws for event 2. C. Record the current year losses for property damage in event 3