The Heinrich Tire Company recalled a tire in its subcompact line in December 2013. Costs associated with the recall were originally thought to approximate $41 million. Now, though, while management feels it is probable the company will incur substantial costs, all discussions indicate that $41 million is an excessive amount. Based on prior recalls in the industry, management has provided the following probability distribution for the potential loss (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tables provided):

Loss Amount	Probability
$31 million	20%
$21 million	50%
$11 million	30%

An arrangement with a consortium of distributors requires that all recall costs be settled at the end of 2014. The risk-free rate of interest is 5%.

Required:

1.	Applying the expected cash flow approach of SFAC No. 7, estimate Heinrich?s liability at the end of the 2013 fiscal year. (Enter your answer in whole dollars.)

5. By the traditional approach to measuring loss contingencies, what amount would Heinrich record at the end of 2013 for the loss and contingent liability? (If no entry is required for an event, select No journal entry required? in the first account field. Enter your answers in whole dollars.) By the traditional approach, Heinrich would accrue the most likely amount, $21 million: 4. Prepare the journal entry to pay the liability at the end of 2014. assuming the actual cost is $20.6 million. Heinrich records an additional loss if the actual costs are higher or a gain if the costs are lower. (It no entry is required for an event, select No journal entry required in the first account field. Enter your answers in whole dollars.)Interest increases the liability to $20 million at the end of 2U14. Since there 4 is a difference between the actual costs, $20.6 million, and the $20 million liability, Heinrich will record an additional loss. 3. Prepare the journal entry to accrue interest on the liability at the end of 2014. (If no entry is required for an event, select No journal entry required in the first account field. Enter your answers in whole dollars.)The difference between $20,000,000 and the initial value of the liability of represents interest expense, which Heinrich will accrue during 2012. 1. Applying the expected cash flow approach of SFAC No.?, estimate Heinrich?s liability at the end of the 2013 fiscal year. (Enter your answer in whole dollars.) 2. Prepare the journal entry to record the contingent liability (and loss). (If no entry is required for an event, select No journal entry required in the first account field. Enter your answers in whole dollars.) Record the contingent liability (and loss)