Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Several months ago, Ayers Industrial Inc. experienced a hazardous material spill at one of its plants. As a result, the Environmental protection Agency (EAP) fined

Several months ago, Ayers Industrial Inc. experienced a hazardous material spill at one of its plants. As a result, the Environmental protection Agency (EAP) fined the company $450,000. The company is contesting the fine. In addition, an employee is seeking $420,000 in damages related to the spill. Finally, 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 believes that it is probable that the EPA fine will stand. In addition, counsel indicates that an out-of court settlement of $180,000 has recently been reached with the employee. The final papers will be signed next week. Counsel believes that 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 liabillities associated with the hazardous material spill. Use the account "Damage Awards and fines" to recognize the expense for the period. If an amount box.does not require an entry, ;eave it blank. b. The note disclosure would - a statement that the EPA fine is probable and would - a statement about the homeowner lawsuit

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

Advanced Accounting

Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith

11th Edition

978-0132568968, 9780132568968

More Books

Students also viewed these Accounting questions