Part A- ) For each of the following items, indicate whether the appropriate accounting treatment is to record a liability in the statement of financial position and report a loss in earnings, or whether there is no liability to be recognized. BRIEFLY explain why you arrived at the decision. 1. A company has been sued by a supplier for $500,000. The company returned raw materials to the supplier that the company found to be of poor quality. The lawsuit from the supplier claims that the products met specifications and the return was without merit. The company's lawyer has indicated that there is a 20% chance that the company will lose the lawsuit 2. A customer has sued the Kerman Company for $2 million. The company may lose but may well offer to settle the suit for $400,000 in the next six months. The customer may or may not accept the settlement. The amount would have a significant impact on the company's financial position 3. A company self-insures for fire hazards. That is, it pays no insurance but is liable to replace assets lost through fire or theft. No losses have been incurred this year, but there have been $100,000 of losses in most other years, and the company is concerned that there might well be $200,000 of losses next year,

Part B-Marks Lackkme Inc. began mining in northern Labrador on January 1, 2016. The Government of Newfoundland and Labrador requires all mining companies to remediate the site when the mining is completed. Lackkme estimates the mine will be operational for 6 years. Lackkme estimates it will cost $1,750,000 to remediate the site at that time. Assume a reasonable market rate of interest is 6%. Lackkme follows IFRS and has a December 31st year end. a. Calculate the present value of the decommissioning liability and prepare the journal entry to record the estimate in 2016. Assume that the assumptions used were correct for the entire 2016 fiscal year. (4 marks) b. Assume that at the end of 2017, the company re-estimates that the cost of remediation at $2,000,000. Other assumptions are unchanged. Calculate the interest expense for 2017, the new present value, and the adjustment to the obligation for the change in estimates. Also prepare the journal entry to record the required amounts.( 6 marks)

Part C- On January 1, 2016 Mendez Inc. acquired a piece of equipment by signing a $10,000 note payable. The note payable bears interest at 5% which is significantly less than Poppins’ borrowing rate of 12%. The terms of the loan call for principal and interest payments each December 31st as follows: On lender's books: Date Interest paid Principal paid Note January 1, 2016 10,000 December 31, 2016 500 5,000 5,000 December 31, 2017 250 5,000 0 Required: Calculate the present value of the note payable on January 1, 2016

Part D- Marks Nickles Inc. started operation in early 2016. They sold washing machines. During the 2016 fiscal year (January, 2016 to December 31, 2016), they sold 1,000 machines at a total sales price of $900 each. Included in the sale price was a twoyear warranty which allowed all defects to be fixed free of charge to the customer for the first 2 years after purchase. At the end of 2016, it was estimated that 3% of the machines sold in 2016 would require repairs at an average cost of $35 per machine by the end of 2017 and that an additional 8% of the machines sold in 2016 would require repairs in 2018 at an average cost of $50 per machine. Required: Prepare the journal entry to record the warranty provision at the end of 2016.