At December 31,2025 , Coburn Corp has as5ets of $10,000,000, labilitis of $6,000,000, commonstock of $2,000,000 (representing 2,000,000 shares of $1 par common stock), and retained earning of $2,000,000, Net sales for the year 2025 were $18,000,000, and net income was $800,000. As auditors of this company, yov are inaking a review of subseguent events on febeuary 13, 2026, and you find the following. 1. On February 3,2026, one of Coburn's customers declared bankuptcy, At December 31, 2025, this company owed Coburn $300,000, of which $60,000 was paid in Jarneary 2026 . 2. On Janiuary 18,2026 , one of the three major plants of theclient bumed. 3. On January 23,2026 , a strike was called at one of Coburn's largest plants, which halted 30% of its production. As of today (February 13), the strike has not been settied. 4. A majior electronics company has iatroduced a line of products that would comipete directly with Coburns primary line, now being produced in aspecially designed new plant. Because of manufacturing innovations, the competitor has been able to achieve quality similar to that of Coburn's products but at ar price 50 Filower. Coburn officlats say they will meet the lower prices, which are high enough to cover variable manufacturing and selfirg costs but which permit recovery of only? portion of fixed costs. 5. Merchandise traded in the open market is recorded in the company s records at $1,40 per unit on December 31,2025 . This price had prevailed for 2 weeks, after release of an official market report that predicted vastly enlarged supplies; however. no purchases were made at \$1.40. The price throughout the preceding year had been about \$2, which was the level experienced over several years. On January 18,2026 , the price returned to $2, after public disclosure of an error in the official calculations of the prior Deceinbes, correction of which destroyed the expectations of excessive supplies. Ioventory at December 31, 2025, was on a lower-of Uf O cost or market basis. 6. On February 1.2026, the board of directors adopted a resolution accetpting the offer of an imvestment banker to guarantee the marketing of $1.200.000 of preferred stock