Q8. (10% of test] 4. To determine the amount at which inventory should be reported on the December 31, Year 1, balance sheet, Monroe Company compiles the following information for its inventory of Product Z on hand at that date: Historical cost. (per Company records].......... $ 20,000 Replacement cost. ....................................$ 14,000 Estimated selling price..................... .............$ 17,000 Estimated costs to complete and sell .......................$ 2,000 Normal profit margin as % of selling price...... ........... 20% Required: The inventory must be written down. By how much? $_ _under IFRS. 09. In Year 1, Better Sleep Company began to receive complaints from physicians that patients were experiencing unexpected side effects from the company's sleep apnea drug. The company took the drug off the market near the end of Year 1. During Year 2, the company was sued by 1,000 customers who had had a severe allergic reaction to the company's drug and required hospitalization. At the end of Year 2, the company's attorneys estimated a 60 percent chance the company would need to make payments in the range of $3,000 to $8,000 to settle each claim, with all amounts in that range being equally likely. In Year 3, 250 claims were settled at a total cost of $1 million. The attorney's estimate remained unchanged. Journal entries for Years 1-3 related to this litigation. [Fill in blanks below.) Do not fill in "..." a. Year 1. No journal entry is necessary. Claims have not yet been made, so a p[ ] obligation does not el b. Year 2 - A present o... exists and there is a g... than 50% probability that an outflow of resources will occur, so a ... should be r... Litigation [ ] $[ ] for legal claims (liability) $[ [ c. Year 3 - An entry is first made to record the payment of claims. ] for legal claims $[ Cash 1 for local claim