Below are four independent situations.

1.In July 2020, a worker was injured at the Markel Industries Indiana plant, that was partially the result of the worker's negligence. The worker has sued Markel Industries for $1,000,000. Markel's Legal counsel believes it is reasonably possible that the outcome of the suit will be unfavorable, and that the settlement will cost the company in the range of $270,000 to $700,000. Legal counsel estimates that within this range, the most likely amount will be $350,000.

2.A suit for breach of contract seeking damages of $300,000 was filed against Fast Eddie's Hot Rod Publications Company, by an author who wrote a book on rebuilding an Oldsmobile 455 cubic inch high performance engine. The suit was filed on October 4, 2020. Fast Eddie's legal counsel believes that an unfavorable outcome is probable. A reasonable estimate of the award to the author is between $75,000 and $200,000. No amount within this range is a better estimate of potential damages than any other amount.

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

4. 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.

Instructions

For each of the four separate independent situations above, explain what the proper accounting treatment should be, including any required disclosures in the financial statements.