In: Business and Management

Submitted By meimeigogo
Words 1277
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Energy Inc.

Date: October 19, 2013

Prepared by: Yuehan Zhang (Stefanie)

Reviewed by: Professor Robert Elya

ISSUE: Accounting for Energy Inc.’s environmental obligations, income tax and install smoke filters.


Energy Inc. (Energy) is a public company that operates in the oil industry. As of December 31, 2011, Energy recognized $ billion in revenue for the sale. Sometimes, Energy’s operations result in soil contamination and Energy should clean up this contamination when legislation requiring under the laws of the particular country. In addition, Energy has a widely published environmental policy in which it undertakes clean up all contamination that it causes. Energy is currently involved in environmental obligations, such as clean up the lands.


1. Does Energy recognizes and accrues the liability of clean up costs in this year? What is the accounting treatment? 2. Is Energy has the obligations to undertake soil remediation in Dirty country? What is the accounting treatment for this operation in Dirty country? 3. What is the accounting treatment for new income tax? What is the accounting treatment for training employees? 4. Does Energy have obligations to install smoke filters this year? What is the accounting treatment for installing smoke filters in Energy’s factories next year?


1. Energy should recognize and accrue the liability of clean up lands in this year. Energy should charge clean up costs to expenses. 2. Energy has no obligations to undertake the soil remediation in Dirty country. 3. Energy should recognize the retraining costs to compensation expenses. 4. Energy should recognize install smoke filters to expense.


Refer to ASC 410-20-25-1 (Background for…...

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