The following items are separate subsequent events, occurring after the balance sheet date of December 31, 2020, but before the financial statements are issued on March 15, 2021. 1. Sale of 5,000 shares of 6% preferred stock ($1 par value) on February 1, 2021. Total proceeds were $50,000. 2. Assume that the sale in (1) took place, but $25,000 of the proceeds were used to liquidate a note payable for $25,000 due on February 15, 2021. 3. Smoke and fire damage due to an electrical storm caused fire in one area of the corporate facilities on Janu- ary 15, 2021. Total damage is estimated to be $500,000. 4. The president of the company resigned unexpectedly on January 31, 2021. 5. It has come to the attention of the board of directors of the company on January 28, 2021, that a competi- tor will be filing a lawsuit within the next week regarding a patent infringement. The product in question yielded $1 million in sales revenue in 2020. Because the details are not known, management is not able to reasonably estimate the loss at this time but believes it is reasonably possible that a loss would be incurred. 6. Employees voted to strike at a meeting on January 15, 2021. The strike is expected to take place immedi- ately. The financial impact on the ately. The financial impact on the company is unknown at this time. 7. A former employee of the company filed a lawsuit against the The following items are separate subsequent events, occurring after the balance sheet date of December 31, 2020, but before the financial statements are issued on March 15, 2021. 1. Sale of 5,000 shares of 6% preferred stock ($1 par value) on February 1, 2021. Total proceeds were $50,000. 2. Assume that the sale in (1) took place, but $25,000 of the proceeds were used to liquidate a note payable for $25,000 due on February 15, 2021. 3. Smoke and fire damage due to an electrical storm caused fire in one area of the corporate facilities on Janu- ary 15, 2021. Total damage is estimated to be $500,000. 4. The president of the company resigned unexpectedly on January 31, 2021. 5. It has come to the attention of the board of directors of the company on January 28, 2021, that a competi- tor will be filing a lawsuit within the next week regarding a patent infringement. The product in question yielded $1 million in sales revenue in 2020. Because the details are not known, management is not able to reasonably estimate the loss at this time but believes it is reasonably possible that a loss would be incurred. 6. Employees voted to strike at a meeting on January 15, 2021. The strike is expected to take place immedi- ately. The financial impact on the company is unknown at this time. 7. A former employee of the company filed a lawsuit against the The following items are separate subsequent events, occurring after the balance sheet date of December 31, 2020, but before the financial statements are issued on March 15, 2021. 1. Sale of 5,000 shares of 6% preferred stock ($1 par value) on February 1, 2021. Total proceeds were $50,000. 2. Assume that the sale in (1) took place, but $25,000 of the proceeds were used to liquidate a note payable for $25,000 due on February 15, 2021. 3. Smoke and fire damage due to an electrical storm caused fire in one area of the corporate facilities on Janu- ary 15, 2021. Total damage is estimated to be $500,000. 4. The president of the company resigned unexpectedly on January 31, 2021. 5. It has come to the attention of the board of directors of the company on January 28, 2021, that a competi- tor will be filing a lawsuit within the next week regarding a patent infringement. The product in question yielded $1 million in sales revenue in 2020. Because the details are not known, management is not able to reasonably estimate the loss at this time but believes it is reasonably possible that a loss would be incurred. 6. Employees voted to strike at a meeting on January 15, 2021. The strike is expected to take place immedi- ately. The financial impact on the company is unknown at this time. 7. A former employee of the company filed a lawsuit against the The following items are separate subsequent events, occurring after the balance sheet date of December 31, 2020, but before the financial statements are issued on March 15, 2021 The following items are separate subsequent events, occurring after the balance sheet date of December 31, 2020, but before the financial statements are issued on March 15, 2021. 1. Sale of 5,000 shares of 6% preferred stock ($1 par value) on February 1, 2021. Total proceeds were $50,000. 2. Assume that the sale in (1) took place, but $25,000 of the proceeds were used to liquidate a note payable for $25,000 due on February 15, 2021. 3. Smoke and fire damage due to an electrical storm caused fire in one area of the corporate facilities on Janu- ary 15, 2021. Total damage is estimated to be $500,000. 4. The president of the company resigned unexpectedly on January 31, 2021. 5. It has come to the attention of the board of directors of the company on January 28, 2021, that a competi- tor will be filing a lawsuit within the next week regarding a patent infringement. The product in question yielded $1 million in sales revenue in 2020. Because the details are not known, management is not able to reasonably estimate the loss at this time but believes it is reasonably possible that a loss would be incurred. 6. Employees voted to strike at a meeting on January 15, 2021. The strike is expected to take place immedi- ately. The financial impact on the company is unknown at this time. 7. A former employee of the company filed a lawsuit against the company for wrongful termination on Janu- ary 5, 2021. Employment had been terminated September 2020. A settlement for the case is highly probable based upon the negotiations that have taken place through mid-March and the estimate of range of loss is $50,000 to $100,000. 8. A customer is threatening legal action against the company for an injury that took place on January 25, 2021, in the company's parking lot. The potential financial impact is not estimable at this time and the like- lihood of a loss is remote. 9. On February 15, 2021, the company declared that it would be selling a 9. On February 15, 2021, the company declared that it would be selling a division that will be classified as a discontinued operation. 10. The company was informed on March 1, 2021, that it would undergo an investigation by the state auditor because of some issues that had surfaced regarding sales tax collection and payments. The company has determined that it is probable that a claim will be asserted, but the company plans to aggressively defend its position and feels that the likelihood of an unfavorable outcome is remote. Required Evaluate each of the above separate transactions and events and recommend appropriate accounting and report- ing actions for the 2020 financial statements. ABC Corporation is preparing its first set of financial statements at December 31, 2020, along with the appropri- ate adjusting entries. Among the contingent losses under consideration are the following transactions and events. 1. Two of the major product lines sold during the year carry a The following items are separate subsequent events, occurring after the balance sheet date of December 31, 2020, but before the financial statements are issued on March 15, 2021. 1. Sale of 5,000 shares of 6% preferred stock ($1 par value) on February 1, 2021. Total proceeds were $50,000. 2. Assume that the sale in (1) took place, but $25,000 of the proceeds were used to liquidate a note payable for $25,000 due on February 15, 2021. 3. Smoke and fire damage due to an electrical storm caused fire in one area of the corporate facilities on Janu- ary 15, 2021. Total damage is estimated to be $500,000. 4. The president of the company resigned unexpectedly on January 31, 2021. 5. It has come to the attention of the board of directors of the company on January 28, 2021, that a competi- tor will be filing a lawsuit within the next week regarding a patent infringement. The product in question yielded $1 million in sales revenue in 2020. Because the details are not known, management is not able to reasonably estimate the loss at this time but believes it is reasonably possible that a loss would be incurred. 6. Employees voted to strike at a meeting on January 15, 2021. The strike is expected to take place immedi- ately. The financial impact on the company is unknown at this time. 7. A former employee of the company filed a lawsuit against the company for wrongful termination on Janu- ary 5, 2021. Employment had been terminated September 2020. A settlement for the case is highly probable based upon the negotiations that have taken place through mid-March and the estimate of range of loss is $50,000 to $100,000. 8. A customer is threatening legal action against the company for an injury that took place on January 25, 2021, in the company's parking lot. The potential financial impact is not estimable at this time and the like- lihood of a loss is remote. 9. On February 15, 2021, the company declared that it would be selling a division that will be classified as a discontinued operation. 10. The company was informed on March 1, 2021, that it would undergo an investigation by the state auditor because of some issues that had surfaced regarding sales tax collection and payments. The company has determined that it is probable that a claim will be asserted, but the company plans to aggressively defend its position and feels that the likelihood of an unfavorable outcome is remote. Required Evaluate each of the above separate transactions and events and recommend appropriate accounting and report- ing actions for the 2020 financial statements. ABC Corporation is preparing its first set of financial statements at December 31, 2020, along with the appropri- ate adjusting entries. Among the contingent losses under consideration are the following transactions and events. 1. Two of the major product lines sold during the year carry a After December 31, 2020, but before the financial results are issued on March 15, 2021, the following independent events have occurred: 1. Sale of 4,000 shares of 7% preferred stock ($1 par value) on February 7, 2021. Total proceeds were $40,000. 2. Assume that the sale in (1) took place, but $20,000 of the proceeds was used to liquidate a note payable for $20,000 due on February 22, 2021. 3. Smoke and fire damage due to an electrical storm caused a fire in one area of the corporate facilities on January 15, 2021. Total damage is estimated to be $500,000. Due to an electrical storm on January 15, 2021, there was smoke and fire damage in one area of the corporate facilities. The damage is estimated to be $500,000. 4. On January 31, 2021, the company's president unexpectedly resigned. 5. On January 28, 2021, the company's board of directors was informed that a competitor will be filing a patent infringement lawsuit within the next week. In 2020, the product in question brought in $1 million in revenue from sales. Management is unable to reasonably estimate the loss at this time but believes it is reasonably possible that a loss would be incurred. 6. On January 15, 2021, employees voted to strike. The strike is scheduled to begin immediately. At the moment, the financial impact on the firm is unknown. 7. On January 5, 2021, a former employee filed a lawsuit against the corporation for wrongful termination. Employment was terminated effective September 2020. The case is highly probable to be settled, based on the conversations that occurred through mid- March, and the estimated range of damage is $60,000 to $100,000. 8. On January 25, 2021, a client was injured in the company's parking lot and threatened legal action. The possible financial impact is unknown at this time, and the likelihood of a loss is remote. 9. On February 15, 2021, the firm announced it will sell a discontinued operating segment. 10. The corporation was notified on March 1, 2021, that the state auditor will be investigating concerns with sales tax collection and payment. The corporation has determined that it is probable that a claim will be asserted, but the company plans to aggressively defend its position and feels that the likelihood of an unfavorable outcome is remote. Required: Evaluate each of the preceding transactions and occurrences and provide accounting and reporting recommendations for the 2020 financial statements