The following events occurred during Sterlings December 31, 20X6, fiscal year:

i. On August 15, 20X6, Sterling issued a $250,000 note payable; the note bears interest at 7.5% and is payable in one year. Sterling classified the liability at fair value through profit or loss (FVPL) when it recorded the transaction in August because it intends to repurchase (or settle) the note in February 20X7. At December 31, 20X6, the fair value of the note was $252,000. The note is payable to Credit Financier Ltd. (CFL). It cost Sterling $2,500 to issue the note. This amount was expensed. Assume that interest expense for the note has been recorded correctly in the interest expense other account.

ii. Seven years ago, in January 20X0, Sterling issued $3,000,000 of 10-year, 9% bonds that pay interest semi-annually on June 30 and December 31. The bonds were issued when the market rate was 8%. Bond issuance costs were $200,000. The December 31, 20X6, payment of the semi-annual interest was recorded as a debit to interest expense of $135,000 and a credit to cash of $135,000.

iii. In November 20X6, Sterling ordered a bigger motor and heavier-duty pulley and lifting system for its warehouse storage system currently under construction. The larger motor and the enhanced lifting system will enable Sterling to continue using the existing storage system for another seven years. With the current equipment, the system would only last two more years. The total cost of the motor, pulley and lifting system is US$84,000. When Sterling ordered the equipment on October 18, the exchange rate was C$1.00 = US$0.84. When the equipment was received on December 15, the exchange rate was C$1.00 = US$0.79. The equipment will be put into operation on January 1, 20X7. The equipment was correctly recorded when received.

On December 31, 20X6, the exchange rate was C$1.00 = US$0.81. On January 13, 20X7, when Sterling paid the invoice, the exchange rate was C$1.00 = US$0.85.

Estimates of other charges related to the purchase are as follows:

Customs and duties $ 4,500

Transportation $ 3,600

Installation and assembly (to date) $12,300

The invoices for these other charges were not received prior to year end and have not been accrued for. The installation and assembly work is being done by an independent contractor.

iv. On December 20, 20X6, the existing motor, pulley and lifting system was sold for $2,500. The original cost of these components was $35,000. They had an expected life of 10 years and an estimated salvage value of $2,000. They had a net book value of $10,250. The cash received was recorded as a gain on sale of $2,500. Installation of the replacement components was not finalized, and the components were not ready for use before year end. Thus, no amortization or capital cost allowance (CCA) are claimed for 20X6 on the replacement component.

v. Sterlings insurance company sent a bill for additional insurance premiums of $350. This bill covers from the December 15 delivery date until the annual policy expires on March 31, 20X7. This bill was paid and the amount expensed. The cost of the policy used should be added to the cost of the asset under construction.

vi. Many of the manufacturers whose products Sterling carries provide a warranty. Sterling also provides an additional warranty on several lines/items. Based on experience over the years, the warranty costs average 0.25% of total sales. The provision is accrued quarterly but has not been recorded yet for the fourth quarter of 20X6; fourth-quarter sales were $3,280,000.

vii. The accounting staff determined that expenses for the fourth quarter included $6,905 of costs directly attributable to warranty work, bringing the total warranty costs paid by Sterling during 20X6 to $27,311. These costs for the fourth quarter have been charged to the wages, salaries, and benefits account. Warranty costs for the first three quarters are properly recorded. viii.In January 20X6, Sterling purchased land for storage of industrial waste and surplus manufacturing plant supplies, paying $1,500,000. The terms of the permit require Sterling to restore the property for any decontamination from oils, solvents, or other contaminants. Sterling hired an appraiser to provide an estimate of the decommissioning costs; the appraisal report projects decommissioning costs to be $850,000. The discount rate for the obligation is 4%. Sterling expects to use the land for 25 years. Management believes that use of the land for waste and surplus storage will not affect the value of the land once the storage site has been decommissioned and restored as required. The appraisal report supports this view. Sterling began using the land for its intended purpose in January 20X6. In reviewing the trial balance, you notice that the land purchase was recorded, but that the related decommissioning obligation has not been recorded.

ix. A competitor, ABC Ltd., is suing Sterling for misuse/unauthorized use of ABCs customer list. Sterling hired a former ABC employee, who ABC alleges took its customer list to Sterling. Sterlings legal advisors have estimated that there is a 65% probability that ABC will be successful in its lawsuit. The legal firm believes that if it is successful, there is a 20% probability that ABC will be awarded $500,000, a 55% probability of a $300,000 award, and a 25% chance of a $250,000 award.

QUESTION: Provide the journal entries for each of the above issues.