number of controversial issues that arose on the union's review of Milk-Vita's December 31, 2017 financial atements and its preliminary discussions with Milk-Vita's management. The union will use your report in its sessment of Milk-Vita's financial position and performance, and its ability to pay higher wages and benefits to mployees. The union leader has asked for your report to fully explain your recommendations, discuss arguments at Milk-Vita's management might use to counter your recommendations, and identify and discuss alternative catments that Milk-Vita might present for the outstanding issues: In November 2017, an number of people became ill, allegedly from eating some of Milk-Vita's products. Milk- Vita vigorously denies the allegation but preliminary evidence from government investigators is pointing to Milk-Vita. A lawsuit has already been launched against the company seeking $500,000 in damages. In addition, Milk-Vita has conducted an advertising campaign attesting to the equality of its products and it has thoroughly cleaned the dairy in question. The advertising campaign cost $30,000 and the cleanup cost $17,500. These amounts were expensed as incurred. The company has accrued $250,000 for the lawsuit, just in case it loses. In November 2015, the company signed an agreement a well-known professional athlete to endorse the Milk- Vita product line. In September 2017, the athlete was found to be a user of performance-enhancing drugs and has been suspended from his sport for at least two years. Milk-Vita has decided not to use the athlete's endorsement anymore, although the company's lawyer advises that the contract doesn't provide any way to avoid paying the agreed $12,000 per month until December 31, 2019. Milk-Vita expensed the full amount of the contract owing, $288,000, in 2017. On December 31, 2017, Milk-Vita shipped a large order to a customer. Normally, Milk-Vita recognizes revenue on delivery to the customer. The goods shipped weren't included in the year-end inventory count. Milk-Vita uses a periodic inventory control system. The goods were delivered on January 2, 2018. Milk-Vita increased estimates of certain items including returns, inventory obsolescence, and volume discounts. Management says that these revised estimates reflect current business conditions. Early in 2017, Frank loaned Milk-Vita $250,000 to provide the cash to purchase needed capital assets. The loan is to be paid back in 2020. Milk-Vita expensed $40,000 in interest on the loan in 2017. In January 2018, a large customer suffered a catastrophic fire that may put the customer out of business. Milk- Vita doesn't expect to collect any of the $65,000 it's owed by the customer and accrued an additional expense for the amount in 2017. quired: ovide the report to the head of the union