rayle grumbled. "Why did Mitch just now give us this assignment?" Your client. Western Manufacturint. involved with several situations that possibly involve contingencies. The assignment Gayle refers to is to draft appropriate accounting treatment for each situation described below in time for tomorrow's meeting of the audit group. Western's fiscal year is the calendar year 2021. and the 2021 financial statements are issued on March 15.2022. 1. During 2021. 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 March 1, 2022. It is virtualy certain that material costs will be incurred but the amount of possible costs cannot be reasonably ascertained. 2. In accordance with a 2019 contractual agreement with A. J.Conner Company. Western is entitled to $37 million for sectain fees and expe reimbursements. These were written off as bad debts in 2020. A. J. Connet has filed for bankruptcy. The bankruptcy court on February 2022. ordered A. J. Conner to pay $23 million immediately.upon consummation of a proposed merger with Garnet Holding Group 3. Western warrants most products it sells against defects in materials and workmanship for a period of a year. Based on their experience with previous product introductions, warranty costs are expected to approximate 2% of sales. A waranty liability of $39 million was posted at December 31, 2020. Sales of warranted products during 2021 were 52.100 million and actual warranty.expenditures were $10 million 4. Western is involved in a suit filed in January 2022 by Crump Holdings seeking $88 million as an adjustment to the purchase price in connection with the Company's sale of its textile business in 2021. The suit allsges that Western misstated the assets and liabilities used to calculate the purchase price for the textile division. Lssal counsel advises that it is seasonably possible that Westen.could end upload indeterminable amount not expected to have a material adverse effect on the Company's financial position Required: 1. Determine the appropriate means of reporting sash situation to the emditamame Mitch Remininde ordered A. J. Conner to pay $23 million immediately upon consummation of a proposed merger with Gamer Holding Group 3. Western warrants most products it sells against defects in materials and workmanship for a period of a year Bused on their experience previous product introductions, warranty costs are expected to approximate 2% of sales. A waranty liability of $39 million was sporto December 31, 2020. Sales of warranted products during 2021 were $2.000 million and actual warranty sxpenditures were $10 million, 4. Western is involved in a suit filed in January 2022 by Crump Holdings seeking $88 million as an adjustment to the purchase price in connection with the Company's sale of its textile business in 2021. The suit alleges that Western misstated the assets and liabilities used to calculate the purchase price for the textile division. Legal counsel advises that it is reasonably possible that Western could end up losing an indeterminable amount not expected to have a material adverse effect on the Company's financial position. Required: 1. Determine the appropriate means of reporting each situation. 2. In a memo to the audit manager. Mitch Riley, explain your reasoning. Include any necessary. journal entries and drafts of appropriate disclosure notes Communication Case 13-8 Various contingencies L013-5, L013-6 "I see an all-nighter coming on." Gayle grumbled. "Why.slid Mitch just now give us this assignment?" Your client. Western Manufacturing. is involved with several situations that possibly involve contingencies. The assignment Gayle refers to is to draft appropriate accounting treatment for each situation described below in time for tomorrow's meeting of the audit.group, Western's fiscal year is the calendar year 2021. and the 2021 financial statements are issued on March 15,2022. 1. During 2021. 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 March 1.2022. 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 2019 contractual agreement with A. J. Conner Company, Western is entitled to $37 million for certain fees and expense reimbursements. These were written off as bad debts in 2020. A. J. Conner has filed for bankruptcy. The bankruptcy court on February 4. 2022. ordered J. Conner to pay $23 million immediately.pon consummation of a proposed merger with Garner Holding Group 3. Western warrants most products itsells against defects in materials and workmanship for a period of a year. Based on their experience with previous product introductions, warranty costs are expected to approximate 2% of sales. A warranty liability of $.39 million was reported at Desember 31, 2020. Sales of warranted products during 2021 were $2.100 million and actual warranty expenditures were $10 million 4. Westem is involved in a suit filed in January 2022 by Crump Holdings seeking $88 million as an adjustment to the purchase price in connection with the Company's sale of its textile business in 2021. The suit alleges that Western misstated the assets and liabilities used to calculate the purchase price for the textile division. Leral counsel advises that it is reasonably possible that Western could end up losingan indeterminable amount not expected to have a material adverse effect on the Company's financial position will be incurred but the amount of possible costs cannot be icasonably ascertained 2. In accordance with a 2019 contractual agreement with A. J. Conner Company, Western is entitled to $37 million for certain fees and expense reimbursements. These were written off as bad debts in 2020. A. J. Conner has filed for bankruptcy. The bankruptcy court on February 4. 2022. ordered A. J. Conner to pay $23 million immediately upon consummation of a proposed merger with Garner Holding Group 3. Western warrants most products it sells against defects in materials and workmanship for a period of a year. Based on their experience with previous product introductions, warranty costs are expected to approximate 2% of sales. A warranty liability of $39 million was reported at December 31, 2020. Sales of warranted products during 2021 were $2.100 million and actual warranty expenditures were 540 million. 4. Western is involved in a suit filed in January 2022 by Crump Holdings seeking $88 million, as an adjustment to the purchase price in connection with the Company's sale of its textile business in 2021. The suit alleges that Western misstated the assets and liabilities used to enleulate the purchase price for the textile division. Legal counsel advises that it is reasonably possible that Western could end up losing an indeterminable amount not expected to have a material adverse effect on the Company's financial position. Required: 1. Determine the appropriate means of reporting each situation. 2. In a memo to the audit manager. Mitch Riley, sxplain your reasoning. Include any necessary.journal entries and drafts of appropriate disclosure notes Page 765 and fill disclosure