CA24-2 (Disclosures Required in Various Situations) Ace Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems. In connection with her examination of Aces financial statements for the year ended December 31, 2013, Gloria Rodd, CPA, completed field work 2 weeks ago. Ms. Rodd now is evaluating the significance of the following items prior to preparing her auditors report. Except as noted, none of these items have been disclosed in the financial statements or notes. Item 1 A 10-year loan agreement, which the company entered into 3 years ago, provides that dividend payments may not exceed net income earned after taxes subsequent to the date of the agreement. The balance of retained earnings at the date of the loan agreement was $420,000. From that date through December 31, 2013, net income after taxes has totaled $570,000 and cash dividends have totaled $320,000. On the basis of these data, the staff auditor assigned to this review concluded that there was no retained earnings restriction at December 31, 2013.

Item 2 Recently Ace interrupted its policy of paying cash dividends quarterly to its stockholders. Dividends were paid regularly through 2012, discontinued for all of 2013 to finance purchase of equipment for the companys new plant, and resumed in the first quarter of 2014. In the annual report, dividend policy is to be discussed in the presidents letter to stockholders.

Item 3 A major electronics firm has introduced a line of products that will compete directly with Ace