The Commonwealth of Virginia filed suit in October 2014 against Northern Timber Corporation, seeking civil penalties and injunctive relief for violations of environmental laws regulating forest conservation. When the 2015 financial statements were issued in 2016, Northern had not reached a settlement with state authorities, but legal counsel advised Northern Timber that it was probable the ultimate settlement would be $1,150,000 in penalties. The following entry was recorded:
General Journal Debit Credit Loss—litigation 1,150,000 Liability—litigation 1,150,000
Late in 2016, a settlement was reached with state authorities to pay a total of $690,000 to cover the cost of violations.
Required: 1. Prepare any journal entries related to the change. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1. Record revision to the liability on the basis of the new estimate.