The Australian Securities and Investments Commission (ASIC) alleged that Portmanteau Bank breached responsible lending laws in April 2019. ASIC commenced civil penalty proceedings in federal court against Portmanteau Bank. As a result, the bank faced an estimated $30 million fine. The legal team informed the bank's Chief Executive Officer (CEO) that the bank's lending standards are sound and that there is a 60% chance that they will win the legal battle initiated by ASIC. Therefore, the accounting department recognized $12 million in ASIC's fines payable provision and fines expense accounts. However, due to new evidence exposed during the ASIC investigation in July, the legal team has informed the CEO that the bank will most likely be found guilty. The newly estimated legal liability could be $28 million. The company published its annual report for the year ended June 30, 2019 on September 30, 2019.

Required: Prepare an adjusting journal entry to meet the requirements of AASB 110.

Answer rating: 100% (QA)

Adjusting Journal Entry Date Account Debit AUD Credit AUD 30Jun2019 Fines Payable Provision ... View the full answer