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a. Journalize the contingent liabilities associated with the hazardous materials spill. Use the account "Damage Awards and Fines" to recognize the expense for the period.

a. Journalize the contingent liabilities associated with the hazardous materials spill. Use the account "Damage Awards and Fines" to recognize the expense for the period.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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4. Caribbean Pride Limited, a juice manufacturing company, was recently exposed for spilling the waste from its manufacturing plant into the river. Since then, the company has been fined $300,000 by the Department of Environment. The company is contesting the fine. An employee is also seeking compensation of $60,000 in damages related to the spill. Finally, a homeowner is suing the company for $120,000. The homeowner lives 25 miles from the plant but believes that the incident has reduced the home's resale value by $120,000. The legal counsel for the company believes that it is probable that the environmental fine will stand. In addition, an out-of-court settlement of $40,000 has recently been reached with the employee. The final papers will be signed next week. Counsel believes that the homeowner's case is much weaker and will be decided in favor of Ayers. Other litigation related to the spill is possible, but the damage amounts are uncertain. a. Journalize the contingent liabilities associated with the hazardous materials spill. Use the account "Damage Awards and Fines" to recognize the expense for the period.
Transcribed Image Text:4. Caribbean Pride Limited, a juice manufacturing company, was recently exposed for spilling the waste from its manufacturing plant into the river. Since then, the company has been fined $300,000 by the Department of Environment. The company is contesting the fine. An employee is also seeking compensation of $60,000 in damages related to the spill. Finally, a homeowner is suing the company for $120,000. The homeowner lives 25 miles from the plant but believes that the incident has reduced the home's resale value by $120,000. The legal counsel for the company believes that it is probable that the environmental fine will stand. In addition, an out-of-court settlement of $40,000 has recently been reached with the employee. The final papers will be signed next week. Counsel believes that the homeowner's case is much weaker and will be decided in favor of Ayers. Other litigation related to the spill is possible, but the damage amounts are uncertain. a. Journalize the contingent liabilities associated with the hazardous materials spill. Use the account "Damage Awards and Fines" to recognize the expense for the period.
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