Problem 8-7B Record contingencies (LO8-5) Compact Electronics is a leading manufacturer of digital camera equipment. Assume the following transactions occur during the year ended December 31, 2021. 1. Accounts receivable were $27.5 million (all credit) at the end of 2021. Although no specific customer accounts have been shown to be uncollectible, the company estimates that 2% of accounts receivable will eventually prove uncollectible. 2. Compact Electronics is the plaintiff in a $3.5 million lawsuit filed against a supplier. The suit is in final appeal, and attorneys advise it is virtually certain that Compact Electronics will win and be awarded $2 million. 3. In November 2021, Compact Electronics became aware of a design flaw in one of its digital camera models. A product recall appears probable and would likely cost the company $450,000. 4. Compact Electronics is the defendant in a patent infringement lawsuit brought by a competitor. It appears reasonably likely Compact Electronics will lose the case, and potential losses are estimated to be in the range of $1 to $2 million. Required: Record any amounts as a result of each of these contingencies. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions. For example, $5.5 million should be entered as 5,500,000.) View transaction list Journal entry worksheet Record the estimated uncollectible accounts. Note: Enter debits before credits. General Journal Debit Credit Transaction 1 Record entry View general journal Clear entry Required information [The following information applies to the questions displayed below.) On January 1, 2021, the general ledger of Grand Finale Fireworks includes the following account balances: Accounts Debit Credit Cash $ 42,700 Accounts Receivable 44,500 Supplies 7,500 Equipment 64,000 Accumulated Depreciation $ 9,000 Accounts Payable 14,600 Common Stock, $1 par value 10,000 Additional Paid-in Capital 80,000 Retained Earnings 45, 100 Totals $ 158,700 $ 158,700 During January 2021, the following transactions occur: January 2 Issue an additional 2,000 shares of $1 par value common stock for $40,000. January 9 Provide services to customers on account, $14,300. January 10 Purchase additional supplies on account, $4,900. January 12 Purchase 1,000 shares of treasury stock for $18 per share. January 15 Pay cash on accounts payable, $16,500. January 21 Provide services to customers for cash, $49, 100. January 22 Receive cash on accounts receivable, $16,600. January 29 Declare a cash dividend of $0.30 per share to all shares outstanding on January 29. The dividend is payable on February 15. (Hint: Grand Finale Fireworks had 10,000 shares outstanding on January 1, 2021, and dividends are not paid on treasury stock.) January 30 Resell 600 shares of treasury stock for $20 per share. January 31 Pay cash for salaries during January, $42,000. 7. Analyze the following for Grand Finale Fireworks: a-1. Calculate the return on equity for the month of January. Answer is complete but not entirely correct. Return on Equity Ratio Return on Choose Numerator - Choose Denominator Equity Ratio Average Stockholders' Return on Net Income + Equity equity $ 4,000 X- $ 153,200x 2.6% a-2. If the average return on equity for the industry for January is 2.5%, is the company more or less profitable than other companies in the same industry? More profitable Less profitable b. How many shares of common stock are outstanding as of January 31, 2021? Answer is complete and correct. Number of common stock outstanding 11,600 C-1. Calculate earnings per share for the month of January. (Hint: To calculate average shares of common stock outstanding take the beginning shares outstanding plus the ending shares outstanding and divide the total by 2.) Choose Numerator Answer is not complete. Earnings Per Share Earnings 1 Choose Denominator Per Share Earnings Average Shares Per Outstanding Share 10,800 Net Income = c-2. If earnings per share was $3.60 last year (i.e., an average of $0.30 per month), is earnings per share for January 2021 better or worse than last year's average? Better Worse