Finley Roofing is involved with several situations that possibly involve contingencies. Each isdescribed below. Finley's fiscal year ends December 31, and the 2023 financial statements areissued on March 20, 2024.1. Finley is involved in a lawsuit resulting from a dispute with a customer. On January 25, 2023,judgment was rendered against Finley in the amount of $10 million plus interest, a total of $11million. Finley plans to appeal the judgment, but does not expect the appeal to succeed.2. At March 20, 2023, the EPA is in the process of investigating possible environmentalviolations at one of Finley's work sites, but has not proposed a deficiency assessment.Management feels an assessment is probable, and if an assessment is made an unfavorablesettlement between $15 million to $23 million is probable.3. Finley is the plaintiff in a $41 million lawsuit filed against AA Asphalt for damages due to lostprofits from rejected contracts and for unpaid receivables. The case is in final appeal and legalcounsel advises that it is certain that Finley will prevail and be awarded $37 million. The settlementis material to Finley's financial statements.4. In October 2022, the State of Montana filed suit against Finley, seeking civil penalties andinjunctive relief for violations of environmental laws regulating hazardous waste. At the time, thecompany's lawyers stated that it was probable that the company would have to pay $25 million infines. On February 3, 2023, Finley reached a settlement with state authorities. Based upondiscussions with legal counsel, the Company feels it is probable that $35 million will be required tocover the cost of violations.Instructions:1.2.Determine the appropriate means of reporting each situation and explain whyPrepare any necessary journal entry.

1. The lawsuit resulting in a judgment of $11 million against Finley should be reported as a loss…

Answered: Instructions: 1. 2. Determine the…

Instructions: 1. 2. Determine the appropriate means of reporting each situation and explain why Prepare any necessary journal entry.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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