The following are the expected downloads for the game, which will be sold for $1.99. Optimistic Average Pessimistic Probability 25 60 15 Year 1 300,000 165,000 75,000 Downloads Year 2 200,000 90,000 50,000 Year 3 55,000 20,000 5,000 Lease payments for the new company car have been capitalized. Monthly payments are $400 for the three-year lease. 10 monthly payments have been made so far. If MGI had purchased the car, it would have cost $30,000. The car has an expected useful life of six years. Depreciation has not yet been recorded. Current interest rate is 6%. At the beginning of the year, MGI issued 100,000, redeemable preferred shares to the public for $5 each. The preferred shares have a dividend yield of 7%. The preferred shares must be redeemed if the common share price exceeds $20 per share. Dividends of $35,000 were declared and paid during the year. During the year, MGI was named in a patent infringement lawsuit in regard to the use of various trademarked logos. The Company's lawyers believe that there is a 50% chance that the case will be settled with no damages to be paid by MGI. However, there is a chance that the company may have to pay between $100,000 and $200,000 in damages. As of year end, both the $100,000 and $200,000 amounts are equally likely (50% each). Draft ASPE financial statements reveal revenue and earnings of $7,478,000 and $2,257,000, respectively. Management displayed their excitement for their ability to meet the Board's revenue and earnings expectations. The partner has asked you to prepare a memo for the audit file that discusses the appropriate accounting treatment for only 3 (three) of the above-noted transactions. While the memo will be used as part of the audit planning process, you are not expected to comment on audit related issues. Required: Prepare the memo.