30. On January 30, 2019, a suit was filed against Frazier Corporation under the Environmental Protection...
30. On January 30, 2019, a suit was filed against Frazier Corporation under the Environmental Protection Act. On August 6, 2020, Frazier Corporation agreed to settle the action and pay $920,000 in damages to certain current and former employees. How should this settlement be reported in the 2020 financial statements? Discuss.
Homework Answers
- On the January 30,2019, when the suit was field against the Frazier Corporation under the Environmental Protection act.
- at the time the corporation made a provison for the suit as a contingent liability in the finacial statement at the year end.
the entry is made with Estimated amount -
Law suit Loss A/c Dr.
To Law suit Liability A/c Cr.
- On the August 6, 2020
- at the time the corporation agreed to settle the action and pay $920,000 .
the enrty will be as follows :-
Law suit Liability A/c Dr.
To Cash Cr.
in this way the law suit liability a/c closed automatically.
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30. On January 30, 2019, a suit was filed
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