The Commonwealth of Virginia filed suit in October $2022$ against Northern Timber Corporation, seeking civil penalties and injunctive relief for violations of environmental laws regulating forest conservation. When the $2023$ financial statements were issued in $2024,$ Northern had not reached a settlement with state authorities, but legal counsel advised Northern Timber that it was probable the ultimate settlement would be $$1,232,000$ in penalties. The following entry was recorded:

General Journal Debit Credit

Loss$$litigation $1,232,000$

Liability$$litigation $1,232,000$

Late in $2024,$ a settlement was reached with state authorities to pay a total of $$734,000$ to cover the cost of violations.

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