Rutgers e-Terminal Ltd. is a private corporation wholly owned by Mr. Adonis Rutgers. Mr. Rutgers also personally owns 40% of the common shares of a company named Princeton Corp. A further 20% of the Princeton common shares are held by Rutgers e-Terminal Ltd. The bookkeeper for Rutgers e-Terminal prepared the following SFP:

RUTGERS E-TERMINAL LTD. Financial Situation
For the year ending 31 December 20X3
Short-Term Assets
Cash on hand	$ 600
Cash in the Royal Dominion chequing account	15,200
Overdraft in the ScotiaTrust chequing account	3,800
Accounts receivable (includes credit balances of $22,000)	52,600
Automobile held for resale, fully depreciated (estimated market value, $10,000)	10,000
Supplies on hand, at cost	1,800
Inventory, at cost (estimated market value, $35,000)	37,900
Final months rent on office space (lease expires in 20X7)	3,000
Investment in shares of subsidiary (market value, $150,000)	130,000
		$247,300
Long-Term Assets
Furniture	40,000
Warehouse	500,000
Prepaid expenses	4,500
Note receivable from customer (issued 5 March 20X1, due on Mr. Rutgers demand)	30,000
Loan receivable from shareholder	120,000	694,500
Total financial assets		$941,800
Liabilities
Payable to suppliers	$175,300
Amounts on purchase orders issued	50,000
Reserve for depreciation on furniture	10,000
Reserve for depreciation on warehouse	75,000
Mortgage due to the Montreal National Bank	380,000
Common shares of Rutgers e-Terminal held by Mr. Rutgers	150,000
Accumulated surplus	101,500
Total financial liabilities		$941,800

Required:

Prepare a corrected classified SFP, using appropriate terminology.

Zero Growth Ltd. has completed financial statements for the year ended 31 December 20X6. The financial statements have yet to be finalized or issued. The following events and transactions have occurred:

The office building housing administrative staff was damaged due to a hurricane on 15 January 20X7.

On 15 November 20X6, a customer sued the company for $1,000,000 based on a claim of negligence leading to personal injury; Zero is actively defending the suit and claims it is unfounded. Nothing has yet been recorded in the 20X6 financial statements in relation to this event.

On 1 February 20X7, The company received a $49,700 income tax reassessment for 20X5.

On 20 December 20X6, Zero applied for a bank loan to replace an existing line of credit. The loan was granted on 2 January 20X7. This event was not recorded in 20X6 or reported in the draft 20X6 financial statements.

The company has reinterpreted a legal agreement entitling it to commission revenue for the sale of a clients products. Zero Growths interpretation would entitle it to an extra $60,000 over and above amounts recognized in 20X6. The amount has not been recorded in the accounts. The client was billed for this amount in 20X6 but has disagreed with Zero on the contract interpretation. Both parties have consulted their lawyers; resolution is not expected soon.

On 1 March 20X7, Zero Growth issued new common shares for cash. The new issue increased the total number of shares outstanding by 15%.

Required:

Discuss the appropriate accounting treatment for the contingencies and subsequent events described.

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