Problem 1 - Current Liabilities - Contingencies The following selected transactions relate to contingencies of Eastern Products Inc., which began operations in July 2018. Eastern's fiscal year ends on December 31. Financial statements are published in April 2019. Assume all amounts are material in nature. 1. In December 2018, Eastern became aware of an engineering flaw in a product that poses a potential risk of injury. As a result, a product recall appears inevitable. This move would likely cost the company $1.48 million. 2. In November 2018, the State of Vermont filed suit against Eastern, asking civil penalties and injunctive relief for violations of clean water laws. Eastern reached a settlement with state authorities to pay $4.18 million in penalties on February 3, 2019. 3. Eastern is the plaintiff in a $38 million lawsuit filed against a customer for costs and lost profits from contracts rejected in 2018. The lawsuit is in final appeal and attorneys advise that it is virtually certain that Eastern will be awarded $28 million. 4. At March 15, 2019, Eastern knows a competitor has threatened litigation due to patent infringement. The competitor has not yet filed a lawsuit. Management believes a lawsuit is reasonably possible, and if a lawsuit is filed, management believes damages of up to $49 million are reasonably possible. Instructions: 1. Determine the appropriate means of reporting each situation and explain why 2. Prepare any necessary journal entry. 140. min