The Commonwealth of Virginia filed suit in October 2011 against Northern Timber Corporation, seeking civil penalties and injunctive relief for violations of environmental laws regulating forest conservation. When the 2012 financial statements were issued in 2013, Northern had not reached a settlement with state authorities, but legal counsel advised Northern Timber that it was probable the ultimate settlement would be $1,048,000 in penalties. The following entry was recorded:
| General Journal |
Debit |
Credit |
| Loss-litigation |
1,048,000 |
|
| Liability-litigation |
|
1,048,000 |
|
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Late in 2013, a settlement was reached with state authorities to pay a total of $608,000 to cover the cost of violations.
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Prepare any journal entries related to the change. (If no entry is required for an event, select "No journal entry required" in the first account field.)
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| Event |
General Journal |
Debit |
Credit |
| 1 |
Liability - Litigation |
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Gain - Litigation |
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