After meeting with representatives of your client, Western Manufacturing, you learn that they are involved with several contingencies. You must prepare a memo summarizing the appropriate accounting treatment for each situation described below in order to present it to the client representatives. Westerns fiscal year is the calendar year 2018 and the 2018 financial statements are issued on April, 2019.

1. During 2018, Western experienced labor disputes at three of its plants. Management hopes an agreement will soon be reached. However negotiations between the Company and the unions have not produced an acceptable settlement and, as a result strikes are ongoing at these facilities since April 2019. it is virtually certain that material costs will be incurred but the amount of possible costs cannot be reasonably ascertained. 2. In accordance with a 2016 contractual agreement with A.J. Conner Company, Western is entitled to $37 million for certain fees and expense reimbursements. These are written off as bad debts in 2017. A.J. Conner has filed bankruptcy. The bankruptcy court in March 2019 ordered A.J. Conner to pay 23 million immediately upon consummation of a proposed merger with Garner Holding Group.

a) include any journal entries and drafts of disclosure notes.

b) explain your reasoning