Prepare any necessary adjusting entries at December 31, 2013, for Melbourn Company’s year- end financial statements for each of the following separate transactions and events.
1. Melbourn Company guarantees the $ 100,000 debt of a supplier. The supplier will probably not default on the debt.
2. A disgruntled employee is suing Melbourn Company. Legal advisers believe that the company will probably need to pay damages, but the amount cannot be reasonably estimated.