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Problem 13-8 (Algo) Expected cash flow approach; product recall [LC13-6) The Heinrich Tire Company recalled a tire in its subcompact line in December 2021. Costs associated with the recall were originally thought to approximate $60 million. Now, though, while management feels it is probable the company will incur substantial costs, all discussions indicate that $60 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 Si and PVAD of $1] (Use appropriate factor(s) from the tables provided.) Los Amount $50 million $40 million $30 million Probability 201 500 306 An arrangement with a consortium of distributors requires that all recall costs be settled at the end of 2022. The risk free rate of interest is 4% Required: 1. & 2. By the traditional approach to measuring loss contingencies, what amount would Heinrich record at the end of 2021 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 202 fiscal year. 3. to 5. Prepare the necessary journal entries. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 to 5 By the traditional approach to measuring loss contingencies, what amount would Heinrich record at the end of 2021 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 2021 fiscal year. (Enter your answers in whole dollars.) Traditional SFAC No. 7 Liability Ruanda Req 3 to 5 > Req 1 and 2 Reg 3 to 5 Prepare the necessary journal entries. (If no entry is required for a transaction/event, select "No Journal entry required" in the first account field. Enter your answers in whole dollars) View transaction list Journal entry worksheet 2 3 Record the contingent liability (and loss). (Apply the expected cash flow approach of SFAC No. 7.) Note: Enter debits before credits General Journal Debit Credit Transaction 01 Record entry Clear entry View general Journal Journal entry worksheet Record the payment of the liability at the end of 2022, assuming the actual cost is $40.7 million. Heinrich records an additional loss if the actual costs are higher or a gain if the costs are lower. (Apply the expected cash flow approach of SFAC No. 7.) Note: Enter debits before credits Transaction 03 General Journal Debit Credit Record entry Clear entry View general Journal Problem 13-8 (Algo) Expected cash flow approach; product recall [LO13-6) The Heinrich Tire Company recalled a tire in its subcompact line in December 2021. Costs associated with the recall were originally thought to approximate $60 million. Now, though, while management feels it is probable the company will incur substantial costs, all discussions indicate that $60 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 S1. FVA of $1. PVA of $1. FVAD of Si and PVAD of $1 (Use appropriate factor(s) from the tables provided.) Los Amount 550 million $40 million $30 million Probability 200 501 308 An arrangement with a consortium of distributors requires that all recall costs be settled at the end of 2022. The risk-free rate of interest is 4% Required: 1. & 2. By the traditional approach to measuring loss contingencies, what amount would Heinrich record at the end of 2021 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 2021 fiscal year. 3. to 5. Prepare the necessary Journal entries. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req3 to 5 By the traditional approach to measuring loss contingencies, what amount would Heinrich record at the end of 2021 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 2021 fiscal year. (Enter your answers in whole dollars.)