Reference no: EM131732135

Question - The following six situations represent various commitments and contingencies of Goofy Inc. at December 31, 2017, and events subsequent to December 31, 2017, but prior to the issuance of the 2017 financial statements.

1. On December 1, 2017, Goofy Inc. was awarded damages of $75,000 in a patent infringement suit it brought against a competitor. The defendant did not appeal the verdict, and payment will be received in January 2018.

2. A former employee of Goofy Inc. has brought a wrongful-dismissal suit against Goofy. Goofy's lawyers believe the suit to be without merit.

3. At December 31, 2017, Goofy had outstanding purchase orders in the ordinary course of business for purchase of a raw material to be used in its manufacturing process. The market price is currently higher than the purchase price and is not anticipated to change within the next year.

4. A government contract completed during 2017 is subject to renegotiation. Although Goofy estimates that it is reasonably possible that a refund of approximately $200,000 - $300,000 may be required by the government, it does not wish to publicize this possibility.

5. Goofy Inc. has been notified by a governmental agency that it will be held responsible for the cleanup of toxic materials at a site where Goofy formerly conducted operations. Goofy estimates that it is probable that its share of remedial action will be approximately $500,000.

6. On January 5, 2018, Goofy redeemed its outstanding bonds and issued new bonds with a lower rate of interest. The reacquisition price was in excess of the carrying amount of the bonds.

Requirement: For each item, determine the reporting requirements of either:

a) Disclosure only

b) Accrual only

c) Both Accrual and Disclosure

d) Neither Accrual nor Disclosure

Explain why you choose the specific action.