Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Contingent liabilives Several months ago, Ayers Industries Inc. experienced a hazardous materials spil at one of its plants. As a resuit, the Environmental Protection Agency

image text in transcribed
Contingent liabilives Several months ago, Ayers Industries Inc. experienced a hazardous materials spil at one of its plants. As a resuit, the Environmental Protection Agency (EPA) fined the compary $60,000. The company is contesting the fine. In addition, an employce is seeking $620,000 in damages related to the spill. Lastly, a homeowner has sued the company for $350,000. The homeowner lives 30 miles from the plant but believes that the incident has reduced the home's resale value by $350,000. Ayers' legal counsel believes that it is probable that the EPA fine will stand. In addition, counsel indicates that an out-of-court settiement of $270,000 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 tiablities associated with the hazardous materials spill, Use the account "Damage Awards and fines" to recognize the expense for the period. If an amount box does not require an entry, leave it blank. 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 company $ which the company is contesting in court. Athough the company admit foult, 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 ibelieve that the lawsuit has merit. Other lawsuits and unknown liablities 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_2

Step: 3

blur-text-image_3

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

Introduction To Managerial Accounting

Authors: Peter Brewer, Ray Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan

6th Canadian Edition

1260060411, 9781260060416

More Books

Students also viewed these Accounting questions

Question

What impediments deal with regulators?

Answered: 1 week ago

Question

What are their performance levels?

Answered: 1 week ago