22. [Contingencies; CHAO adapted] Bonnywill Auto produced 10,000 Fiery models. On December 31, 2002. company engineers discovered a possible fire hazard for this model. The probability of fire is estimated at 0.00009. If a fire occurs, the company's liability 15 estimated at $100,000 per occurrence, plus or minus $30,000. When answering the following questions, show any calculations

a. Describe the most likely treatment of this contingency in Bonnywill's 2002 financial statements.

b. SFAC 7 (2000) provides a framework for using expected cash flows and present value to measure assets and liabilities. Suggest an alternative treatment using expected values that would portray the liability more accurately.