Finley Roofing is involved with several situations that possibly involve contingencies. Each is described below. Finley's...

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Finley Roofing is involved with several situations that possibly involve contingencies. Each is described below. Finley's fiscal year ends December 31, and the 2023 financial statements are issued on March 20, 2024. 1. Finley is involved in a lawsuit resulting from a dispute with a customer. On January 25, 2023, judgment was rendered against Finley in the amount of $40 million plus interest, a total of $44 million. Finley plans to appeal the judgment, and believes it highly probable that the judgement will be reduced to between $24 million to $26 million. 2. At March 20, 2023, the EPA is in the process of investigating possible environmental violations at one of Finley's work sites, but has not proposed a deficiency assessment. Management feels an assessment is probable, and if an assessment is made an unfavorable settlement of $15 million is reasonably possible. 3. Finley is the plaintiff in a $45 million lawsuit filed against AA Asphalt for damages due to lost profits from rejected contracts and for unpaid receivables. The case is in final appeal and legal counsel advises that it is certain that Finley will prevail and be awarded $41 million. The settlement is material to Finley's financial statements. 4. In October 2022, the State of Montana filed suit against Finley, seeking civil penalties and injunctive relief for violations of environmental laws regulating hazardous waste. At the time, the company's lawyers stated that it was probable that the company would have to pay $45 million in fines. On February 3, 2023, Finley reached a settlement with state authorities. Based upon discussions with legal counsel, the Company feels it is probable that $52 million will be required to cover the cost of violations. Instructions: 1. 2. Determine the appropriate means of reporting each situation and explain why Prepare any necessary journal entry. Finley Roofing is involved with several situations that possibly involve contingencies. Each is described below. Finley's fiscal year ends December 31, and the 2023 financial statements are issued on March 20, 2024. 1. Finley is involved in a lawsuit resulting from a dispute with a customer. On January 25, 2023, judgment was rendered against Finley in the amount of $40 million plus interest, a total of $44 million. Finley plans to appeal the judgment, and believes it highly probable that the judgement will be reduced to between $24 million to $26 million. 2. At March 20, 2023, the EPA is in the process of investigating possible environmental violations at one of Finley's work sites, but has not proposed a deficiency assessment. Management feels an assessment is probable, and if an assessment is made an unfavorable settlement of $15 million is reasonably possible. 3. Finley is the plaintiff in a $45 million lawsuit filed against AA Asphalt for damages due to lost profits from rejected contracts and for unpaid receivables. The case is in final appeal and legal counsel advises that it is certain that Finley will prevail and be awarded $41 million. The settlement is material to Finley's financial statements. 4. In October 2022, the State of Montana filed suit against Finley, seeking civil penalties and injunctive relief for violations of environmental laws regulating hazardous waste. At the time, the company's lawyers stated that it was probable that the company would have to pay $45 million in fines. On February 3, 2023, Finley reached a settlement with state authorities. Based upon discussions with legal counsel, the Company feels it is probable that $52 million will be required to cover the cost of violations. Instructions: 1. 2. Determine the appropriate means of reporting each situation and explain why Prepare any necessary journal entry.

Answer rating: 100% (QA)

1 Lawsuit with a customer The appropriate means of reporting this situation is as a contingent liability in the financial statements The judgment agai... View the full answer