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Homework answers / question archive / In 2014, a major bank paid the government $13 billion to settle a lawsuit
In 2014, a major bank paid the government $13 billion to settle a lawsuit. How did this payment immediately change assets, liabilities, and owners' equity?
See below.
| Assets | Liabilities | Equity |
|---|---|---|
| Decrease | Decrease | No impact |
The assets will decrease since cash was paid out. The liabilities will decrease because the provision for the lawsuit (assuming it was already accrued given that this is a settlement) is now removed from the books.
