The Commonwealth of Virginia filed suit in October 2011 against Northern Timber Corporation, seeking civil penalties and injunctive relief for violations of environmental laws regulating forest conservation. When the 2012 financial statements were issued in 2013, Northern had not reached a settlement with state authorities, but legal counsel advised Northern Timber that it was probable the ultimate settlement would be $1,000,000 in penalties.
The following entry was recorded:

Required:
1. Prepare any journal entries related to the change.
2. Briefly describe other steps Northern should take to report thechange.

Transcribed Image Text:

Loss-litigation.. 1,000,000 Liability-litigation.. 1,000,000