Company A in January of 2015, was told they would be fined for violating state regulations. After discussing it with their attorney's they received a possible range of between $150,000 to $400,000 in liability for the violation. When the financial statements were issued in 2015, a settlement had not been made with state authorities, so they accrued a contingent liability of $175,000. Late in 2016, a settlement was reached with state authorities to pay a total of $350,000 in penalties.
For each of the situations described above, provide the information indicated below assuming it is December 2016. .
1. Type of accounting change.
2. Manner of reporting the change under current generally accepted accounting principles including a discussion, where applicable, of how amounts are computed.
3. Effect of the change on the balance sheet and income statement.
4. Footnote disclosures that would be necessary.