Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Chapter 20, Problem 20.13E
Loss contingency
• LO20–4
The Commonwealth of Virginia filed suit in October 2016, against Northern Timber Corporation seeking civil penalties and injunctive relief for violations of environmental laws regulating forest conservation. When the financial statements were issued in 2017, Northern had not reached a settlement with state authorities, but legal counsel advised Northern Timber that it was probable the ultimate settlement would be $1,000,000 in penalties. The following entry was recorded:
| Loss—litigation | 1,000,000 | |
| Liability—litigation | 1,000,000 |
Late in 2018, a settlement was reached with state authorities to pay a total of $600,000 to cover the cost of violations.
Required:
- 1. Prepare any
journal entries related to the change. - 2. Briefly describe other steps Northern should take to report the change.
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Chapter 20 Solutions
Intermediate Accounting
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