Question

Jackson owns a building where he rents to tenants. Robertson is suing Jackson for 350,000 for an injury he sustained while living in the building. The attorneys performed estimates of the value of the lawsuit and outcomes below: Based upon the facts and potential outcomes below; how will Jackson handle each probability.

A, Assume it is likely that Jackson will win the lawsuit with the amount being 240,000

B. Assume it probable that Jackson will settle the lawsuit for an amount between 300K-500K

C. Assume it is reasonably possible that Jackson will settle the lawsuit for $375,000.

D, Assume it is remote that Jackson will lose the lawsuit

E. Assume it is probable that Jackson will settle the lawsuit but the amount cannot be estimated.

Byrd owns a transmission repair shop He sells warranties allowing the customer to fix their transmissions on the shop if they return within 3 years or 60.000 miles. Byrd estimates that 7% of sales will be covered under warranty. The average repair costs $ 325. Sales for the year were 785,000. The balance in the warranty liability account was 82,250 at the beginning of the year. Warranty expenditures were 97500.( 5 points)

What is warranty expense for the year?

What is the warranty liability as of 12/31?

Lewis Inc. issued   30 $10000 bonds on January 1, 2015. The bonds paid 8% when the market rate of interest was 6%. The bonds matured in 10 years. Interest is paid semi-annually on June 30 and December 31.

Using the information above do the following: ( 15 points)

Calculate the present value of the bonds?

What is the carrying value of the bonds at 6/30/18?

If the bonds are redeemed on 6/30/18 for 198000. What is the gain or loss on the redemption

Answer 1

Answer 1
A.	Provision for the lawsuit amount to be created
	Amount =	2,40,000.00
B.	Provision for the lawsuit amount to be created
	Amount	3,50,000.00
C.	Provision for the lawsuit amount to be created
	Amount =	3,75,000.00
D.	No provision to be created
E.	No provision to be created
Answer 2
Warranty Expense for the year		54,950.00
Opening Warranty Liability		82,250.00
Add: Addition during the year		54,950.00
Less: Warranty expenditure		97,500.00
Closing Warranty Liability		39,700.00