Please provide journal entry for this transaction
Technotronics Electronics Limited Technotronics Electronics Limited (TEL) is a small, start-up technology company in Ottawa that manufac- tures portable keyboards for mobile devices and tablets. TEL has been working to perfect a technology that is used in a laser-projection virtual keyboard. TEL has been investing heavily in research and development, and is constantly having working capital issues. In order to ease the pressure, TEL has taken out a $500,000 working capital loan. The loan is required to be paid back within two years, and carries an interest rate of 1% per month on any outstanding balance. The loan includes a covenant that requires the current ratio to be maintained at least 1.5:1. You are the controller of TEL, and you are preparing for the December 31, 2017, year-end audit. You know that the shareholders and bank will be paying close attention to the financial statements this year due to the covenant. Accordingly, the CFO would you like to prepare a memo that analyzes the following key accounting issues: 1. TEL is currently being sued for patent infringement by a rival company. TEL's lawyers believe that the patent infringement case is unfounded; however, litigation always includes an element of uncer- tainty. Accordingly, the lawyers have developed the following payment estimates: 35% chance of no payment, 45% chance of a $100,000 payment, and 20% chance of a $250,000 payment. The case will be settled by March 31, 2018. Technotronics Electronics Limited Technotronics Electronics Limited (TEL) is a small, start-up technology company in Ottawa that manufac- tures portable keyboards for mobile devices and tablets. TEL has been working to perfect a technology that is used in a laser-projection virtual keyboard. TEL has been investing heavily in research and development, and is constantly having working capital issues. In order to ease the pressure, TEL has taken out a $500,000 working capital loan. The loan is required to be paid back within two years, and carries an interest rate of 1% per month on any outstanding balance. The loan includes a covenant that requires the current ratio to be maintained at least 1.5:1. You are the controller of TEL, and you are preparing for the December 31, 2017, year-end audit. You know that the shareholders and bank will be paying close attention to the financial statements this year due to the covenant. Accordingly, the CFO would you like to prepare a memo that analyzes the following key accounting issues: 1. TEL is currently being sued for patent infringement by a rival company. TEL's lawyers believe that the patent infringement case is unfounded; however, litigation always includes an element of uncer- tainty. Accordingly, the lawyers have developed the following payment estimates: 35% chance of no payment, 45% chance of a $100,000 payment, and 20% chance of a $250,000 payment. The case will be settled by March 31, 2018
