CHART OF ACCOUNTS

Ayers Industries Inc.

General Ledger

	ASSETS
110	Cash
111	Accounts Receivable
112	Interest Receivable
113	Notes Receivable
115	Merchandise Inventory
116	Supplies
118	Prepaid Insurance
120	Land
123	Building
124	Accumulated Depreciation-Building
125	Office Equipment
126	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
213	Interest Payable
214	Notes Payable
215	Salaries Payable
216	Social Security Tax Payable
217	Medicare Tax Payable
218	Employees Federal Income Tax Payable
219	Employees State Income Tax Payable
221	Retirement Savings Deductions Payable
224	Federal Unemployment Tax Payable
225	State Unemployment Tax Payable
226	Vacation Pay Payable
227	Unfunded Pension Liability
228	Litigation Claims Payable
229	EPA Fines Payable

	EQUITY
310	Common Stock
311	Retained Earnings
312	Dividends
313	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

nstructions Several months ago, Ayers Industries Inc. experienced a hazardous materials spillat one of its plants. As a result, the Environmental Protection Agency EPA) fined the company $238,000. The company is contesting the fine. In addition, an employee is seeking S210,000 in damages related to the spill Lastly, a homeowner has sued the company for $305,000. The homeowner lives 35 miles from the plant but believes that the incident has reduced the home's resale value by $305,000 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 $125,000 has recently been reached with the employee. The final papers will be signed next week. Counsel beleves 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. Required: A. On December 31, journalize the contingent liabilities associated with the hazardous materials spill Use the account "De Awards and Fines" to recognize the expense for the period. Refer to the Chart of Accounts for exact wording of account titles B. Prepare a note disclosure relating to this incident