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Part 3. Contingent Liabilities Facts: A company is sued prior to the financial statement date (i.e. year-end) . Before the financial statements are issued, the suit is settled for $750,000, a material loss to the company. Before year-end, a company is assessed $200,000 in additional taxes as a result of an IRS audit. The company's tax attorney believes that a settlement with the IRS can be reached for $110,000. Settlement has not been reached before the financial statements are issued. Required: For both cases discussed above, answer two questions: 1. Should the company record a loss reserve at year end, and if so, for how much? 2. Should the company disclose this matter in the footnotes to the company's financial statements at year end