The Commonwealth of Virginia filed suit in October 2014, against Northern Timber

Question

The Commonwealth of Virginia filed suit in October 2014, 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 2015, Northern had not reached a settlement with state authorities, but legal counsel advised Northern Timber that it wa

The Commonwealth of Virginia filed suit in October 2014, 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 2015, Northem had not reached a settlement with state authorities, but legal counsel advised Northern Timber that it was probable the ultimate settlement would be $1,650,000 irn penalties. The following entry was recorded: Loss-litigation 1,650,000 Liability-litigation 1,650,000 Late in 2016, a settlement was reached with state authorities to pay a total of $1,120,000 to cover the cost of violations. Required: 1. Prepare any journal entries related to the change. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the revision of the liability on the basis of the new estimate. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal

Explanation / Answer

Date Account dEbit credit Liability -Litigation 530,000 Gain on litigation   530,000 [being change in estimate recorded1650000-1120000]

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