Consider the following independent situations. For each of the situations described, discuss how the recognition criteria should be applied and suggest the appropriate accounting treatment.

a. A publisher sells magazines on a two-year subscription. Customers are required to pay the full amount at the commencement of the subscription.

b. A company is being sued by a customer group for losses sustained due to a faulty product design. The company’s lawyers feel the suit will likely succeed, but they cannot estimate the potential amount of damages that will be awarded.

c. A company has completed a large infrastructure construction project as part of an economic development partnership with a foreign government. The invoice for the work has been issued, but due to a recent change in government, there is some doubt about whether payment will actually be received.

d. A social media company has recorded an asset described as ”Goodwill” and an offsetting amount in its equity section. The amount was determined by comparing the current trading value of the company’s shares to the recorded value of the company’s shares on the balance sheet.

e. A resource company is obligated by municipal regulations to clean up the site of an active drilling operation in 10 years’ time when the resource has been fully extracted.
The company is in its first year of operations and has no previous experience in cleaning up drilling sites.