1. At December 31, 2013 Tango Company is suing Jazz Company for using its special patented dance moves. Tango is suing Jazz for $250,000 and Tango's lawyers believe that it is probable that Tango will win. A decision is expected to be made by the judge by the end of 2014.

Should Tango: Accrue and Disclose, Disclose Only, or Do Nothing?

- Accrue and disclose

- Disclose only

- Do nothing

2. Tulip Co. is a public company is in the midst of a court case at year-end with Buzz Co. All parties' lawyers feel quite certain that Buzz will be successful in the case, and that Tulip will have to pay a material amount, between $2,000,000 and $2,100,000.

How should Tulip Co. communicate this information in its year-end financial statements?

- Recognize a provision.

- Do nothing.

- Disclose only.