Question

In May of 2018, Raymond Financial Services became involved in a penalty dispute with the EPA. At December 31, 2018, 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 2018 financial statements were issued, Raymond accepted an EPA settlement offer of $900,000. Raymond should have reported an accrued liability on its December 31, 2018, balance sheet of:

Answer 1

Raymond should have reported an accrued liability on its December 31, 2018, balance sheet of $900,000

Step-by-step explanation:

Accrued liability: The Accrued liability is an expense that is incurred but it would not be paid and presented in the balance sheet as short term liability or long term liability.

The accrued liability would be recorded at $900,000 as the Raymond accepted an EPA settlement offer before the issue of the financial statements.

So, all other information which is given in the question is not relevant and thus ignored it.