Several months ago, Maximilien Company experienced a spill of radioactive materials into the Missouri River from one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $1,750,000.
The company contested the fine. In addition, an employee is seeking $975,000 damages related to the spill. Finally, a homeowner has sued the company for $580,000.
Although the homeowner lives 15 miles downstream from the plant, he believes that the spill has reduced his home's resale value by $580,000. Maximilien's legal counsel believes the following will happen in relationship to these incidents:
It is probable that the EPA fine will stand. An out-of-court settlement for $650,000 has recently been reached with the employee, with the final papers to be signed next week.
Counsel believes that the homeowner's case is weak and will be decided in favor of Maximilien Company. Other litigation related to the spill is possible, but the damage amounts are uncertain.
Required: Based on this information, prepare the journal entries for the contingent liabilities associated with the spill. Use the account "Environmental Awards and Fines" to recognize the expense for the period. If an amount box does not require an entry, leave it blank or enter "0".