a. | Debit | Credit | |||||
Damages,Awards and Fines | 700000 | ||||||
EPA fines payable | 550000 | ||||||
Litigation claims payable | 150000 | ||||||
(Contingent liabilities recorded) | |||||||
b. | The company experienced a hazardous materials spill at one of it's plants during the previous period | ||||||
This spill has resulted in a number of law suits to the company is a party.The Environmental Protection Agency (EPA) has fined the company $ 550000, which the company is contesting in court | |||||||
Although the company does not admit fault,legal counsel believes that the fine payment is probable. | |||||||
In addition an employee has sued the company.A $ 150000 out-of-court settlement has reached with the employee. | |||||||
The EPA fine and out-of-court settlement has recognized as an expense for the period. | |||||||
There is one other outstanding lawsuit related to this incident. | |||||||
Councel does not believe that the lawsuit has merit. | |||||||
Other lawsuits and unknown liabilities may arise from this incident | |||||||
Contingent Liabilities Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of...
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