Problem:
In May of 2015, Raymond Financial Services became involved in a penalty dispute with the EPA. At December 31, 2015, the environmental attorney for Raymond indicated that an unfavorable outcome to the dispute was probable. The additional penalties were estimated to be $770,000 but could be as high as $1,170,000. After the year-end, but before the 2015 financial statements were issued, Raymond accepted an EPA settlement offer of $900,000.
Required:
Question: Prepare the necessary entry for Raymond to record the liability (in any) for its financial statements dated December 31, 2015.
Note: Please provide reasons to support your answer.