Question

Problem 8-7B Record contingencies (LO8-5) Compact Electronics is a leading manufacturer of digital camera equipment. Assume the following transactions occur during the year ended December 31, 2021. 1. Accounts receivable were $27.2 million (all credit) at the end of 2021. Although no specific customer accounts have been shown to be uncollectible, the company estimates that 2% of accounts receivable will eventually prove uncollectible. 2. Compact Electronics is the plaintiff in a $3.2 million lawsuit filed against a supplier. The suit is in final appeal, and attorneys advise it Is virtually certain that Compact Electronics will win and be awarded $1.7 million. 3. In November 2021, Compact Electronics became aware of a design flaw in one of its digital camera models. A product recall appears probable and would likely cost the company $420,000. 4. Compact Electronics is the defendant In a patent Infringement lawsuit brought by a competitor. It appears reasonably likely Compact Electronics will lose the case, and potential losses are estimated to be in the range of $0.7 to $1.7 million Required: Record any amounts as a result of each of these contingencles. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions. For example, $5.5 million should be entered as 5,500,000.)

Answer 1

A	Bad debts expense	544,000
	Allowance for Doubtful Accounts		544,000
	(27,200,000*2%)
B	No entry
C	loss	420,000
	Contingent liability		420,000
D	No entry

Comment if you face any issues