Barone, Inc. is involved with several situations that possibly involve contingencies. Each is described below. Barone's...

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Barone, Inc. is involved with several situations that possibly involve contingencies. Each is described below. Barone's fiscal year ends December 31, and the 2021 financial statements are issued on March 1, 2022. 1. At March 1, 2022, the EPA is in the process of investigating possible chemical leaks at two of Barone's facilities, but has not proposed a deficiency assessment. Management feels an assessment is reasonably possible, and if an assessment is made an unfavorable settlement of up to $8 million is reasonably possible. 2. In July 2020, the State of Arkansas filed suit against Barone, seeking civill penalties and injunctive relief for violations of environmental laws regulating hazardous waste. On February 12, 2022, Barone reached a settlement with state authorities. Based upon discussions with legal counsel, the Company feels it is probable that $13 million will be required to cover the cost of violations. 3. Barone is involved in a lawsuit resulting from a dispute with a customer. A judgment against Barone was not yet rendered, and the results are highly uncertain. Barone estimates a potential loss of $18 million if they lose the case. Required: 1. Determine the appropriate means of reporting each situation(i.e. accrual loss or not, disclosure or not). Explain your reasoning. 2. Prepare any necessary journal entries. Barone, Inc. is involved with several situations that possibly involve contingencies. Each is described below. Barone's fiscal year ends December 31, and the 2021 financial statements are issued on March 1, 2022. 1. At March 1, 2022, the EPA is in the process of investigating possible chemical leaks at two of Barone's facilities, but has not proposed a deficiency assessment. Management feels an assessment is reasonably possible, and if an assessment is made an unfavorable settlement of up to $8 million is reasonably possible. 2. In July 2020, the State of Arkansas filed suit against Barone, seeking civill penalties and injunctive relief for violations of environmental laws regulating hazardous waste. On February 12, 2022, Barone reached a settlement with state authorities. Based upon discussions with legal counsel, the Company feels it is probable that $13 million will be required to cover the cost of violations. 3. Barone is involved in a lawsuit resulting from a dispute with a customer. A judgment against Barone was not yet rendered, and the results are highly uncertain. Barone estimates a potential loss of $18 million if they lose the case. Required: 1. Determine the appropriate means of reporting each situation(i.e. accrual loss or not, disclosure or not). Explain your reasoning. 2. Prepare any necessary journal entries.

Answer rating: 100% (QA)

1 and 2 a No disclosure is required because an EPA claim is as yet unasserted and an asse... View the full answer