1. Potential costs due to the discovery of a possible defect related to one of its products. These costs are probable and can be reasonably estimated.
2. A potential claim for damages to be received from alawsuit filed this year against another company. It is probable that proceeds from the claim will be received by Skinner next year.
3. Potential costs due to a promotional campaign where by a cash refund is sent to customers when coupons are redeemed. Skinner estimated, based on past experience, that 70% of the coupons would be redeemed. In actuality, 40% of the coupons were actually redeemed and the cash refunds sent this year. The remaining 30% of the coupons are expected to be redeemed next year.
1. How should Skinner report the potential costs due to thediscovery of a possible product defect? Explain the reasonsfor your answer.
2. How should Skinner report this year the potential claimfor damages that may be received next year? Explain thereasons for your answer.
3. This year, how should Skinner account for the potential costs and obligations due to the promotion campaign? Explainthe reasons for your answer.
Cite all references used.