The following legal claims exist for Kewa Co. Identify the accounting treatment for each claim as either

(a) a liability that is recorded or

(b) an item described in notes to its financial statements. 1. Kewa (defendant) estimates that a pending lawsuit could result in damages of $1,250,000; it is reasonably possible that the plaintiff will win the case. 2. Kewa faces a probable loss on a pending lawsuit; the amount is not reasonably estimable. 3. Kewa estimates damages in a case at $3,500,000 with a high probability of losing the case.

AppendixLO1