PROBLEM 2 (A) Welson Co. is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Welson's lawyer states that it is probable that Welson will lose the suit and be found liable for a judgment costing Welson anywhere from $400,000 to $2,000,000. However, the lawyer states that the most probable cost is $1,200,000. As a result of the above facts, Welson should accrue and what should be disclosed? (B) On August 1, 2006, the Frost Company purchased property from Anderson that had a fair value of $399,271. Frost gave Anderson a $500,000 noninterest-bearing note payable in five equal annual installments of $100,000 with the first payment due July 31, 2007. What is the amount of interest expense that should be recognized by Frost in 2007, using the effective interest method? (C) Pryor Corporation issued a 2-for-1 stock split of its common stock which had a par value of $10 before and after the split. At what amount should retained earnings be capitalized for the additional shares issued