Contingent liabilities Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $560,000. The company is contesting the fine. In addition, an employee is seeking $620,000 in damages related to the spill. Lastly, a homeowner has sued the company for $350,000. The homeowner lives 30 miles from the plant but believes that the incident has reduced the home's resale value by $350,000. Ayers' legal counsel believes that it is probable that the EPA fine will stand. In addition, counsel indicates that an out-of-court settlement of $270,000 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. If an amount box does not require an entry, leave it blank. 38 b. The company experienced a hazardous materials spill at one of its plants during the previous period. This spill has resulted in a number of lawsuits to which the company is a party. The Environmental Protection Agency (EPA) has fined the company s which the company is contesting in court. Although the company In addition, an employee has sued the company. A s admit fault, legal counsel believes that the fine payment is out-of-court settlement has been reached with the employee. The EPA fine and out-of-court settlement have been recognized as for the period. There is one other outstanding lawsuit related to this incident. Counsel believe that the lawsuit has merit. Other lawsuits and unknown liabilities may arise from this incident.
Contingent liabilities Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $560,000. The company is contesting the fine. In addition, an employee is seeking $620,000 in damages related to the spill. Lastly, a homeowner has sued the company for $350,000. The homeowner lives 30 miles from the plant but believes that the incident has reduced the home's resale value by $350,000. Ayers' legal counsel believes that it is probable that the EPA fine will stand. In addition, counsel indicates that an out-of-court settlement of $270,000 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. If an amount box does not require an entry, leave it blank. 38 b. The company experienced a hazardous materials spill at one of its plants during the previous period. This spill has resulted in a number of lawsuits to which the company is a party. The Environmental Protection Agency (EPA) has fined the company s which the company is contesting in court. Although the company In addition, an employee has sued the company. A s admit fault, legal counsel believes that the fine payment is out-of-court settlement has been reached with the employee. The EPA fine and out-of-court settlement have been recognized as for the period. There is one other outstanding lawsuit related to this incident. Counsel believe that the lawsuit has merit. Other lawsuits and unknown liabilities may arise from this incident.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Note:-
- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
- Answer completely.
- You will get up vote for sure.
Transcribed Image Text:Contingent liabilities
Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its plants. As a result, the Environmental Protection Agency (EPA) fined the
company $560,000. The company is contesting the fine. In addition, an employee is seeking $620,000 in damages related to the spill. Lastly, a homeowner has sued the
company for $350,000. The homeowner lives 30 miles from the plant but believes that the incident has reduced the home's resale value by $350,000.
Ayers' legal counsel believes that it is probable that the EPA fine will stand. In addition, counsel indicates that an out-of-court settlement of $270,000 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.
If an amount box does not require an entry, leave it blank.
18
b. The company experienced a hazardous materials spill at one of its plants during the previous period. This spill has resulted in a number of lawsuits to which the
company is a party. The Environmental Protection Agency (EPA) has fined the company t
which the company is contesting in court. Although the company
In addition, an employee has sued the company. A s
admit fault, legal counsel believes that the fine payment is
out-of-court settlement has been reached with the employee. The EPA fine and out-of-court settlement have been recognized as
for the period.
There is one other outstanding lawsuit related to this incident. Counsel
believe that the lawsuit has merit. Other lawsuits and unknown abilities
may arise from this incident.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education