Acct Critical Thinking Assignment

Acct Critical Thinking Assignment - decided in favor of...

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Critical Thinking Assignment 1 25 Points See pages 504 –506 in your textbook for Accounting Treatment for Contingent Liabilities Several months ago, Jones Company experienced a spill of hazardous materials into the White River from one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $405,000. The company contested the fine. In addition, an employee is seeking $180,000 damages related to the spill. Finally, a homeowner has sued the company for $260,000. Although the homeowner lives 30 miles downstream from the plant, he believes that the spill has reduced his home’s resale value by $260,000. Jones’ legal counsel believes the following will happen in relationship to these incidents: (a) It is probable that the EPA fine will stand. (b) An out-of-court-settlement for $165,000 has recently been reached with the employee, with the final papers to be signed next week. (c) Counsel believes that the homeowner’s case is much weaker and will be
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Unformatted text preview: decided in favor of Jones Company. (d) Other litigation related to the spill is possible, but the damage amounts are uncertain. Required: (1) Based on this information, journalize the contingent liabilities associated with the spill. Use the account Damage Awards and Fines to recognize the expense for the period. 10 Points (2) Prepare any note disclosure related to the spill. 15 Points Account Debit Credit EPA Fine $405,000 Accounts Payable $405,000 Employee Damages $165,000 Accounts Payable $165,000 Damage Awards and Fines $570,000 The damage amounts are still uncertain. I t is possible that the total owed for the spill could be $260,000 more from the homeowners case, bringing the total to $830,000. It will most likely be decided in favor of Jones Soda, keeping the total at $570,000. Do this assignment in Word and upload it to the Course Drop Box....
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Acct Critical Thinking Assignment - decided in favor of...

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