Randal Go-Karls salts motorised go-karls. Randall tie-Karts are motorized and are typically purchased by amusement putts and other recreation Facilities, but are also occasionelry purchased by Incdvlduate for their own persoi'tal use. The compmy uses a perpemet inventory system. Selected u'ai'tsactlms It the month of December follow: Etctick the icon to view the transactions.) Eutirement 1. Describe how each ofthe contingent liabiilies 'n the selected December transactions would betrealaed in Rmdal's fnenciel statements tot 2019. [Select [our answers} D A. Dec 27 hans-actim wil be reported as nliabiity on the balance sheet mcl an expense on the income statement. Transaction wilnot he bohulecl since it '5 recorded on the Mandel statements. El B. Dec22tnnsectionwil notbe tootnoted because it isunliielylobe a loss. E] c. Dec 5 transaction wil be reported as a liabiity on the balance sheet and an expense on Iha income s1atamerrt. Trmsaction oil also be foolnoted. I] D. Dec 5 transaction wil be footnoted as a conthgent liablty. I] E. Dec 31 transaction wil be reported as aliabiity on the balance sheet and an expense on the income statement. Transaction willaisobefoomoted. I] F. Dec31 b'ensaclionwil be reportedas aliabilty Ol'lt-B oalarm sheetmd an aripenseon the inoornestalement. Transaction wilnotbefoolnoted sime itis recorded on the financial statements. DE. Decu'ansaclimwilberepcrledasaliabiityontbebalamesheetmdalossenteincomestaternent.Transacti:Inwilatsobefootnoted. I] H. Dec22b'ensaclion wil befoob'iolodas aconlingent liability. December 1 20 22 27 31 Randall sold 10 goJrarts on account The selling price of each goliart was $1,000; the cost of goods sold for each was $250. Randall received notice of a class-action lawsuit being led against it. The lawsuit claims that Randall's goltarls have engine defects that appear after the warranty period expires. The plaintiffs want Randall to replace the detective engines and pay damages for the owners' loss of use. The cost of replacing the engines would be approximately $400,000 {not including any damages}. Randall's attorney believes that it is reasonably possible that Randall will lose the case, but the attorney cannot provide a dollar estimate of the potential loss amount. Randall performed repairs due to product warranty complaints for two go-karts sold eartier in the year. Randall's cost of the repairs. paid in cash, was $500. An individual claims that he suffered emotional distress from a higospeed ride on a Randall Go-Karl and is seeking $500,000 in damages. Randall's attorney believes the case is frivolous because it does not have any legal merit. Another customer is suing Randall for $200,000 because a defect in the customer's Randall Go-Kart engine started a re and destroyed the customer's garage. Randall's attorney believes the customer witl probably win the case and receive $200,000- {Use the following account names: Loss from Lawsuit and Accrued Liability from Lawsuit} Randall estimates that the warranty expense is 5% of gross sales. Randall's gross sales for the period totaled $T00,000_
