Fiddler Inc., a publiccompany,preparesannual financial statements on December 31. Analysis indicates the following:

1. The companyhas been sued byan employeefordiscriminationfor$ 5,000,000indamages. Legal counsel believes it is unlikely that the company will have to pay any damages.The amount is material( substantial)to the company.
2. Employeeshaveaccrued( earned)$4,200 in vacation pay benefits at December 31.
3. The companyhas been suedin a $3,000,000 product liability lawsuit. Legal counsel believes the companywillprobably have to pay the fullamount.
4. On November 1, Fiddler signed a $ 10,000, 6-month, 8% note payable. No interest has been accrued to date.

Instructions:

Prepar anynecessaryadjusting entriesatDecember 31.