Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Contingent abilities Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its plants. As a result, the Environmental Protection Agency

image text in transcribed
Contingent abilities 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 $440,000. The company is contesting the fine. In addition, an employee is seeking 3490,000 in damages related to the spill. Lastly, a homeowner has sued the company for $280,000. The homeowner lives 30 miles from the plant, but believes that the incident has reduced the home's resale value by $280,000 Ayers legal counsel belleves that it is probable that the EPA fine will stand. In addition, counsel indicates that an out of court settlement of $210,000 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 Finest to recognize the expense for the period. If an amount box does not require an entry, leave it blank Damage Awards and Fines EPA Fines Payable Litigation Claims Payable 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 companys which the company is contesting in court. Although the company admit fault, legal counsel believes that the fine payment is In addition, an employee has sued the company AS 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 labilities may arise from this incident

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Information Systems

Authors: Ulric Gelinas, Richard Dull, Patrick Wheeler

10th Edition

113393594X, 9781133935940

More Books

Students also viewed these Accounting questions