Stella Inc., which prepares annual financial statements, is preparing adjusting entries on December 31. Analysis indicates the following:
1. The company is the defendant in an employee discrimination lawsuit involving $ 50,000 of damages. Legal counsel believes it is unlikely that the company will have to pay any damages.
2. December 31 is a Friday. The employees of the company have been paid on Monday, December 27 for the previous week which ended on Friday, December 24. The company employs 30 people who earn $ 80 per day and 15 people who earn $ 120 per day. All employees work 5-day weeks.
3. Employees are entitled to one day's vacation for each month worked. All employees described above in 2. worked the month of December.
4. The company is a defendant in a $ 750,000 product liability lawsuit. Legal counsel believes the company probably will have to pay the amount in full.
5. On November 1, Fiddler signed a $ 10,000, 6-month, 8% note payable. No interest has been accrued to date.
Instructions
Prepare any adjusting entries necessary at the end of the year.

Question

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The Answer of Stella Inc., which prepares annual financial statements, is preparing adjusting entries on December 31. Analysis indicates the following:
1. The company is the defendant in an employee discrimination lawsuit involving $ 50,000 of damages. Legal counsel believes it is unlikely that the company will have to pay any damages.
2. December 31 is a Friday. The employees of the company have been paid on Monday, December 27 for the previous week which ended on Friday, December 24. The company employs 30 people who earn $ 80 per day and 15 people who earn $ 120 per day. All employees work 5-day weeks.
3. Employees are entitled to one day's vacation for each month worked. All employees described above in 2. worked the month of December.
4. The company is a defendant in a $ 750,000 product liability lawsuit. Legal counsel believes the company probably will have to pay the amount in full.
5. On November 1, Fiddler signed a $ 10,000, 6-month, 8% note payable. No interest has been accrued to date.
Instructions
Prepare any adjusting entries necessary at the end of the year.