Jul 08, 2020

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Accounting Treatment: Describe the situation in a note to the financial statements. Justification: If a contingent is reasonably possible, then it should be disclosed in the notes to the financial statements. The above situation is reasonably possible; so, the situation should be disclosed in a note to the financial statements.

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entries help achieve the goals of accrual accounting by recognizing revenue when it is earned and recognizing expenses when the related goods or services are used. All adjusting entries affect both an income statement account and a balance sheet account.

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