Faramarzinikpey Company, a public company, is preparing its annual financial statements on December 31, 2022. The following selected information is available:

1. The company has been sued by an employee for discrimination. The employee is seeking $5,000,000 in damages. Legal counsel believes it is unlikely that the company will have to pay any damages. The amount is material ( substantial ) to the company.

2. Employees have accrued ( earned ) $4,200 in vacation pay benefits as of December 31,2022.

3. The company has been sued in a $ 3,000,000 product liability lawsuit. Legal counsel believes the company will probably have to pay the full amount.

4. On October 1, 2022, the company signed a $ 10,000, 6-month, 8% note payable. No interest has been accrued to date.

Instructions:

Prepare any necessary adjusting entries or disclosures on December 31, 2022.