Skinner company has the following contingenciespotential, Ask an Expert

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Skinner Company has the following contingencies: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.

A potential claim for damages to be received from a lawsuit filed this year against another company. It is probable that proceeds from the claim will be received by Skinner next year.

Potential costs due to a promotional campaign whereby 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.

QUESTION: How should Skinner report this year the potential claim for damages that may be received next year? Explain the reasons for your answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9979512

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