On December 2, 2018, one of the oil and gas division’s wells exploded. It leaked a significant amount of oil into a nearby stream until it could be repaired. The repair was completed on December 27, 2018, but remediation of the site has just begun. It cost $800,000 to repair the well, as a number of attempts initially failed, and new components had to be fabricated to replace the damaged parts. Our CEO issued a press release soon after the explosion, stating that the company will bear the full cost for cleaning up the damage and returning the site to its original condition. It is estimated that it will cost between 2 million to $4 million to fully remediate the site. The process of remediation will likely take several years, as the process of cleaning up the site and the nearby waterway is complicated.

1. What potential journal entries will need to be made to account for the repair and the estimated cleaning costs?
2. What impact will this have on the balance sheet and the income statement?