The Dow Chemical Company provides chemical, plastic, and agricultural products and services to various consumer markets. The following excerpt is taken from the disclosure notes of Dow’s 2010 annu

The Dow Chemical Company provides chemical, plastic, and agricultural products and services to various consumer markets. The following excerpt is taken from the disclosure notes of Dow’s 2010 annual report:

At December 31, 2010, the Company had accrued obligations of $607 million for environmental remediation and restoration costs, including $59 million for the remediation of Superfund sites. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although the ultimate cost with respect to these particular matters could range up to approximately twice that amount.

Required:

Does the excerpt describe a loss/gain contingency?

Yes

No

Under what conditions would Dow accrue such a contingency?

Probable or reasonably estimable

Probable and reasonably estimable

Probable

Reasonably estimable

What journal entry would Dow use to record this amount of provision (loss)? (Enter your answers in millions. If no entry is required for a event, select “No journal entry required” in the first account field. Enter your answers in whole dollars.)

Leave a Comment