Monsanto’s 2012 annual report stated that the company’s liabilities for environmental remediation and litigation contingencies are $213 million as of 8/31/12 ($176 million as of 8/31/11).

a. Describe how the liabilities affected the basic accounting equation.

b. What accounting principle is being followed by Monsanto? Explain.

c. Assume $25 million was actually spent in 2012 to remediate environmental problems. Draw a T-account and reconstruct 2012 changes for contingencies.