The Heinrich Tire Company recalled a tire in its subcompact line in December $2024.$ Costs associated with the recall were originally

thought to approximate $$46$ million. Now, though, while management feels it is probable the company will incur substantial costs, all

discussions indicate that $$46$ million is an excessive amount. Based on prior recalls in the industry, management has provided the

following probability distribution for the potential loss:

Note: Use tables, Excel, or a financial calculator. $($FV of $$1,$ PV of $$1,$ FVA of $$1,$ PVA of $$1,$ FVAD of $$1$ and PVAD of $$1)$

An arrangement with a consortium of distributors requires that all recall costs be settled at the end of $2025.$ The risk$-$free rate of

interest is $5\%.$

Required:

& $2.$ By the traditional approach to measuring loss contingencies, what amount would Heinrich record at the end of $2024$ for the loss

and contingent liability? For the remainder of this problem, apply the expected cash flow approach of SFAC No$.7.$ Estimate Heinrich's

liability at the end of the $2024$ fiscal year.

to $5.$ Prepare the necessary journal entries.

Complete this question by entering your answers in the tabs below.

By the traditional approach to measuring loss contingencies, what amount would Heinrich record at the end of $2024$ for the

loss and contingent liability? For the remainder of this problem, apply the expected cash flow approach of SFAC No$.7.$

Estimate Heinrich's liability at the end of the $2024$ fiscal year.

Note: Enter your answers in whole dollars.