Fiddler Music Company, 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. The company is a defendant in a $750,000 product liability lawsuit. Legal counsel believes the company probably will have to pay the amount requested.
3. 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 Fiddler Music Company, 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. The company is a defendant in a $750,000 product liability lawsuit. Legal counsel believes the company probably will have to pay the amount requested.
3. 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.

Fiddler Music Company, Which Prepares Annual Financial Statements, Is Preparing