For Each Independent Situation

Essay

For each independent situation:
1. A customer sued Vernon Tractor Corp. for $300,000 for breach of contract. Vernon's solicitors advise that they will almost certainly be found liable. Based on previous results, counsel estimates that there is a 70% probability that the courts will award the $300,000 being sought; a 20% probability that $230,000 will be conferred; and a 10% probability that the judgment will be $140,000.
2. Pickering Conveyor and Clutch Ltd. are in the midst of preparing their financial statements for the year ended December 31, 2021. Pickering has been in ongoing discussions with its bankers about renewing its $2,500,000 loan maturing on June 30, 2022. While nothing had been finalized by year-end, the bank did agree to extend the maturity by five years on January 15, 2022.
Required:
Describe how the event should be dealt with in the financial statements and explain why. Prepare all required journal entries.