A.)Andrew Reyes is the president, founder and majority owner of Safe Medical Corporation, an emerging medical technology products company. Safe Medical urgently needs additional capital to keep operating and to bring several promising products to final development, testing, and production. Reyes, as owner of 51% of the outstanding stock, manages the company's operations. He places heavy emphasis on research and development and long-term growth. The other principal stockholder is Tim Santos who, as a nonemployee investor, owns 40% of the stock. Tim would like to deemphasize the R & D functions and emphasize the marketing function to maximize short-run sales and profits from existing products. She believes this strategy would raise the market price of Safe Medical's stock. All of Andrew's personal capital and borrowing power is tied up in his 51% stock ownership. He knows that any offering of additional shares of stock will dilute his controlling interest because he won't be able to participate in such an issuance. But, Tim has money and would likely buy enough shares to gain control of Safe Medical. She then would dictate the company's future direction, even if it meant replacing Andrew as president and CEO. The company already has considerable debt. Raising additional debt will be costly, will adversely affect Safe Medical's credit rating, and will increase the company's reported losses due to the growth in interest expense. Tim and the other minority stockholders express opposition to the assumption of additional debt, fearing the company will be pushed to the brink of bankruptcy. Wanting to maintain his control and to preserve the direction of "his" company, Andrew is doing everything to avoid a stock issuance and is contemplating a large issuance of bonds, even if it means the bonds are issued with high effective interest rate.

(a) Who are the stakeholders in this situation?

(b) What are the ethical issues in this case?

(c) What would you do if you were Andrew?

B.) On February 1, 2019, one of the huge storage tanks of MS Manufacturing Company exploded. Windows in houses and other buildings within a one-mile radius of the explosion were severely damaged, and a number of people were injured. As of February 15, 2019 (when the December 31, 2018, financial statements were completed and sent to the publisher for printing and public distribution), no suits had been filed or claims asserted against the company as a consequence of the explosion. The company fully anticipates that suits will be filed and claims asserted for injuries and damages. Because the casualty was uninsured and the company considered at fault, Viking Manufacturing will have to cover the damages from its own resources.

Discuss fully the accounting treatment and disclosures that should be accorded the casualty and related contingent losses in the financial statements dated December 31, 2018.

C.)Constant Company is being sued for P4, 000,000 for an injury caused to a child as a result of alleged negligence while the child was visiting the Constant Company plant in March 2018. The suit was filed in July 2018. Constant's lawyer states that it is probable that Constant will lose the suit and be found liable for a judgement costing anywhere from P400, 000 to P2, 000,000. However the lawyer states that the most probable judgement is P1, 000,000.

How should Constant report the suit in its 2018 financial statements. Discuss the rationale for your answer. Include in your disclosures, if any, that should be made in Constant's financial statements.