The Environmental Protection Agency (EPA) is in the process of investigating a possible water contamination issue at the manufacturing facility of Northwest Forest Products. The EPA has not yet proposed a penalty -assessment. Management feels the possibility of a penalty is remote but, if an assessment is made, an unfavorable settlement is estimated to be $25 million. Determine how the estimated cost of the settlement will affect the current financial statements. Multiple Choice O A contingent liability need only be disclosed in the company's notes. A contingent loss must be recorded for $25 million but need not be disclosed in the notes. A loss and a contingent liability must be recorded and disclosed in the company's notes. The potential loss and liability should not be recorded or disclosed because it is remote possibility.
The Environmental Protection Agency (EPA) is in the process of investigating a possible water contamination issue at the manufacturing facility of Northwest Forest Products. The EPA has not yet proposed a penalty -assessment. Management feels the possibility of a penalty is remote but, if an assessment is made, an unfavorable settlement is estimated to be $25 million. Determine how the estimated cost of the settlement will affect the current financial statements. Multiple Choice O A contingent liability need only be disclosed in the company's notes. A contingent loss must be recorded for $25 million but need not be disclosed in the notes. A loss and a contingent liability must be recorded and disclosed in the company's notes. The potential loss and liability should not be recorded or disclosed because it is remote possibility.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The EPA is in process of investigating a possible water contamination issue at the manufacturing facility of NW forest products. The EPA has not yet proposed a penalty assessment. Management feels the possibility of a penalty is remote but if an assessment is made an unfavorable settlement is estimated to be $25 million . Determine how the estimated cost of the settlement will affect the current financial statements.
Transcribed Image Text:The Environmental Protection Agency (EPA) is in the process of investigating a possible water contamination issue at the manufacturing facility of Northwest Forest Products. The EPA has not yet proposed a penalty
assessment. Management feels the possibility of a penalty is remote but, if an assessment is made, an unfavorable settlement is estimated to be $25 million.
Determine how the estimated cost of the settlement will affect the current financial statements.
Multiple Choice
A contingent liability need only be disclosed in the company's notes.
A contingent loss must be recorded for $25 million but need not be disclosed in the notes.
A loss and a contingent liability must be recorded and disclosed in the company's notes.
The potential loss and liability should not be recorded or disclosed because it is remote possibility.
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