Late in 2013, you and two other officers of Curbo Fabrications Corporation just returned from a meeting

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Late in 2013, you and two other officers of Curbo Fabrications Corporation just returned from a meeting with officials of The City of Jackson. The meeting was unexpectedly favorable even though it culminated in a settlement with city authorities that required your company pay a total of $475,000 to cover the cost of violations of city construction codes. Jackson had filed suit in November 2011 against Curbo Fabrications Corporation, seeking civil penalties and injunctive relief for violations of city construction codes regulating earthquake damage standards.

Alleged violations involved several construction projects completed during the previous three years. When the financial statements were issued in 2012, Curbo had not reached a settlement with state authorities, but legal counsel had advised the Company that it was probable the ultimate settlement would be $750,000 in penalties. The following entry had been recorded:


Late in 2013, you and two other officers of Curbo


The final settlement, therefore, was a pleasant surprise. While returning from the meeting, your conversation turned to reporting the settlement in the 2013 financial statements. You drew the short straw and were selected to write a memo to Janet Zeno, the financial vice president, advising the proper course of action.

Required:
Write the memo. Include descriptions of any journal entries related to the change in amounts. Briefly describe other steps Curbo should take to report thesettlement.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Intermediate accounting

ISBN: 978-0077647094

7th edition

Authors: J. David Spiceland, James Sepe, Mark Nelson

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