The Commonwealth of Virginia filed suit in October 2022 against Northern Timber Corporation, seeking civil penalties and
Question:
The Commonwealth of Virginia filed suit in October 2022 against Northern Timber Corporation, seeking civil penalties and injunctive relief for violations of environmental laws regulating forest conservation. When the financial statements were issued in 2023, 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:
Late in 2024, a settlement was reached with state authorities to pay a total of $600,000 to cover the cost of violations.
Required:
1. Prepare any journal entry(s) related to the change.
2. Is Northern required to revise prior years’ financial statements as a result of the change?
3. Is Northern required to provide a disclosure note to report the change?
Step by Step Answer:
Solution 1 The journal entry is as follows Reconcile the accounts Change in Cash 1000000 Less Liability change of 600 800000 Note The reconciliation d...View the full answer
