Several months ago, Endurance Battery Company experienced a hazardous materials spill at one of its plants. As
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Endurance Battery’s legal counsel believes that it is probable that the EPA fine will stand. In addition, counsel indicates that an out-of-court settlement of $250,000 has recently been reached with the employee. The final papers will be signed next week. Counsel believes that the homeowner’s case is much weaker and will be decided in favor of Endurance. Other litigation related to the spill is possible, but the damage amounts are uncertain.
a. Record the contingent liabilities associated with the hazardous materials spill.
b. Prepare a note disclosure relating to this incident.
Contingent liabilities
A contingent liability is an obligation of business related to an uncertain future event. The business must record it in its financial statements if the amount can be reliably estimated and it is probable that amount will be paid by business as a...
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Related Book For
Financial Accounting An Integrated Statements Approach
ISBN: 978-0324312119
2nd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
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