Question: Presented below are two independent situations. Answer the question at the end of each situation. 1. During 2020, Salt-n-Pepa Inc. became involved in a tax

Presented below are two independent situations. Answer the question at the end of each situation.

1. During 2020, Salt-n-Pepa Inc. became involved in a tax dispute with the IRS. Salt-n-Pepa Inc. believe it is probable that the company will lose this dispute and have to pay the IRS $900,000. How should Salt-n-Pepa Inc. report this contingency as of December 31^st, 2020 (fiscal year end)? If needed, prepare the journal entry for Salt-n-Pepa Inc.

	Debit	Credit

2. Etheridge Inc. had a manufacturing plant in Sudan, which was destroyed in the civil war. Etheridge has been assured by governmental officials that it will receive a definite amount for this plant. The amount of the compensation will be more than its book value. How should Etheridge Inc. report this contingency?

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