In 2014, a major bank paid the government $13 billion to settle a lawsuit

Accounting Dec 16, 2020

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?

Expert Solution

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.

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