Problem 23-2 (AICPA Adapted) Star Company, a publisher, is preparing the 2020 financial statements and must determine the proper accounting treatment for each of the following situations: . An author filed a suit for breach of contract seeking damages of P2,000,000 against Star Company on July 1, 2020. The entity's legal counsel believed that an unfavorable outcome is probable. The best estimate of the court's award to the plaintiff is P1,500,000. During December 2020, a competitor filed suit against Star Company for industrial espionage, claiming P3,000,000 in damages. Management and legal counsel believed it is probable that damages will be awarded to the plaintiff and the best estimate of the damages is P1,000,000. * Star Company signed as guarantor for P2,000,000 loan by PNB to Moon Company, a principal supplier of Star Company. By reason of financial difficulties, it is probable that Star Company shall pay the P2,000,000 loan with only a 60% recovery anticipated from Moon Company. What total amount should be accrued as provision on December 31, 2020? a. 3,700,000 b. 3,300,000 c. 2,500,000 d. 7,000,000 11