Respond to the accounting situations below. Prepare the journal entries as required.

For each situation, fully discuss the correct accounting treatment, including any required disclosures. Provide an explanation for your answers. A reasonably thorough answer would be 50 to 70 words in length.

Required
Consolation Corporation follows IFRS. Complete the following with the details provided.

Consolation Corporation has been in contract negotiations with its union for over a year. On February 10, Year 9, the union is asking for a 7% increase retroactive to Year 8, and 3% per year for Year 9 and the next two years. Consolation Corporation is offering a 3% increase retroactive to Year 8 and 2% thereafter. The negotiating team believes that the eventual settlement will be for a 5% retroactive increase for Year 8 and then 2% thereafter.

During Year 8, Consolation Corporation was sued for $2,500,000. The plaintiff is alleging breach of contract, and defense counsel believes an unfavourable outcome is more likely than not. A reliable measurement of the award to the plaintiff is between $600,000 and $1,800,000.

During Year 8, Consolation Corporation sued another company. The corporation’s legal counsel believes it is likely that Consolation Corporation will be awarded damages of $1,000,000.

In November, Year 8, one of Consolation Corporation’s factories caught fire and was destroyed. Insurance will cover the full loss except for a deductible on the policy of $300,000. Consolation Corporation is quite concerned that insurance premiums will increase substantially, perhaps even double.