Prepare any necessary adjusting entries at December 31, 2011, for Moor Company’s year-end financial statements for each of the following separate transactions and events.
1. A disgruntled employee is suing Moor Company. Legal advisers believe that the company will probably need to pay damages, but the amount cannot be reasonably estimated.
2. Moor Company guarantees the $5,000 debt of a supplier. The supplier will probably not default on the debt.