The developer is currently negotiating with the plaintiffs for an out-of-the court settlement for P8,000,000. The plaintiffs have not decided on this offer but their responses have been generally positive. The developer estimates that there is a 50% chance that the out of court settlement will materialized in a 1-year time. Determine the following as a result of your audit: 1. How much is the amount of provision that Cedarwood Company recognized in relation to provision with probable outside court settlement? 2. Assuming that no entries were made by the company to reflect both provision in the financial statement, what is your proposed adjusting journal entry (PAJE)? Case 5 The Basil Company started a two programs to induced sales of its variety of product. The programs were summarized below: Premium promotional program Basil Company inaugurated a premiums promotional campaign at the beginning of 2021. Two stickers are included for every sachet of shampoo sold. These stickers will be used to redeem a hair brush. To claim one hair brush, a customer shall present 30 stickers. Each sachet of shampoo is sold at P15 while the hair brush had a cost of P5 each. The following is the summary of the promotional campaign for years 2021 and 2022: 2021 2022 Total sachets of shampoo sold 300,000 562,500 Total stickers presented for redemption 405,000 825,000 The company estimates that only 80% of the stickers will be presented for redemption. The hair brush can be sold separately at P10 if not use in premium promotional program. Warranty sales program Basil Company started its business in selling printers with three-year warranty. It estimates its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 3% will be repaired during the first year of warranty, 5% will be repaired during the second year of warranty and 7% will be repaired in the third year. The product warranty provides service other than agreed upon specification. In 2021 and 2022, the company was able to sell 10,000 units and 12,500 units, respectively at a total price of P7,000 per unit. The company also incurred actual repair costs of P3,500,000 and P9,500,000 in 2021 and 2022, respectively. The selling price of the warranty is P2,000 per unit. The printer is selling at P5,000 if without the warranty. Determine the following as a result of your audit: 1. How much is the balance of unearned premium income in its December 31, 2021 statement of financial position? 2. How much is the gross profit (loss) from premium recognized in its December 31, 2021 statement of comprehensive income? 3. How much is the balance of unearned premium income in its December 31, 2022 statement of financial position? 4. How much is the gross profit (loss) from premium recognized in its December 31, 2022 statement of comprehensive income? 5. How much is the balance of unearned warranty income in its December 31, 2021 statement of financial position? 6. How much is the gross profit (loss) from warranty recognized in its December 31, 2021 statement of comprehensive income? 7. How much is the balance of unearned warranty income in its December 31, 2022 statement of financial position? 8. How much is the gross profit (loss) from warranty recognized in its December 31, 2022 statement of comprehensive income? 9. Assuming that the warranty is to provide assurance, what is the warranty expense recognized in its December 31, 2022 statement of comprehensive income? 10. Assuming that the warranty is to provide assurance, how much is the balance of warranty liability in its December 31, 2022 statement of financial position? CASE 6 The liability for compensated absences of Fress Company had a beginning balance of P402,750, it represents the probable unused sick leave and vacation leave in 2021and prior to 2021 carried over to 2022. The company's policy is to allow the employees to carry over unused leaves over two years from year of grant, thereafter, it shall expire. Salary rate for current year (2022) increased by 10%. An analysis of the cumulative unused sick leave and vacation leave are as follows: 6|Page | AP0 2 - April2022 icern