B. Simon Company, a toy manufacturer that also operates several retail outlets, is preparing its December...
B. Simon Company, a toy manufacturer that also operates several retail outlets, is preparing its December 31, 2019, financial statements. Simon has an incinerator behind one of its retail outlets which is used to burn cardboard boxes received in shipment of inventory from suppliers. The state environmental protection agency filed suit against the company in September 2019 for air pollution. Simon expects to stop using the incinerator and begin recycling. However, its lawyers believe that it is probable that a fine between $40,000 and $60,000 will be levied against the company, although they cannot predict the exact amount.
Instructions: Prepare the journal entry, if any on December 31, 2019 to record the information for Simon, and explain your reasoning. In addition, explain how the situation would be disclosed in the company’s annual report.
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B. Simon Company, a toy manufacturer that also
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