1. Montana Coffee Roasters is involved in a pending court case in which they have sued their supplier of organic coffee beans. Montanas lawyers believe it is probable that they will be awarded damages of $650,000.

2. Mastercraft Marine Paint Company, experienced a fire that destroyed their manufacturing facility. The loss is estimated at $815,000. The company has filed a claim with their insurance company, and hopes the entire loss, less a $25,000 deductible, will be covered.

Explain what the proper accounting treatment should be, including any required disclosures in the financial statements.