1. On December 2, 2018, one of the oil and gas divisions wells exploded. It leaked a significant amount of oil into a nearby stream until it could be repaired. The repair was completed on December 27, 2018, but remediation of the site has just begun. It cost $800,000 to repair the well, as some attempts initially failed, and new components had to be fabricated to replace the damaged parts. Our CEO issued a press release soon after the explosion, stating that the company will bear the full cost of cleaning up the damage and returning the site to its original condition. It is estimated that it will cost between $2 million to $4 million to fully remediate the site. The process of remediation will likely take several years, as the process of cleaning up the site and the nearby waterway is complicated.

Create a memo to summarize the key financial reporting issues. Where possible, he would also like to know the potential impact of the issue on the balance sheet and income statement, and he would like an explanation of why an adjustment is required. If there are areas where judgment is involved, or the accounting treatment is not clear, he would like to know the alternatives that are available and factors that need to be considered in choosing an alternative.