Reference no: EM132652473
Donuts Ltd. reports under IFRS and has a December 31, 20X1 year-end. Donuts was sued by a customer in July 20X1 for damages caused by one of its products. Legal counsel has advised management that it thinks the company will have to settle the lawsuit by paying damages ranging from $50,000 to $80,000. No payments for damages have been made in 20X1 but are expected to be made in 20X2. The company has guaranteed the personal loan held by its CEO with her bank. That loan, which is in the name of the CEO, not the company, is for $100,000. The company guaranteed the loan because there was only a 10% probability of the CEO defaulting on her loan payments. During 20X1, she made all the required loan payments. In November, 20X1 the company signed an agreement to purchase 1,000 units of inventory from a supplier in 20X2 at a cost of $4 per unit. By December 31, 20X1, the product was selling for $2 per unit. In the blank boxes below, please provide the amounts asked for in each of the following questions in this order (when entering amounts please do not use commas, negative signs, dollar signs or cents - please round your answer to the nearest dollar).
Question 1: The amount that the company will record for the lawsuit provision for the year ended December 31, 20X1.
Question 2: The amount that the company will report on its December 31, 20X1 statement of financial position for the loan guarantee liability.
Question 3: The amount that the company will report on its December 31, 20X1 statement of financial position for the purchase commitment liability.
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