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1 8 . a ) Your company is the defendant in a lawsuit. Your company s management believes it is reasonably possible that your company

18. a) Your company is the defendant in a lawsuit. Your companys management believes it is
reasonably possible that your company will lose the lawsuit and have to pay $2 million.
How should the contingent liability be accounted for? (1 point)
b) Would you change your answer if your companys management believes it is probable
that your company will lose the lawsuit and have to pay damages in the range of $1.8 to $2
million (with all amounts in this range considered equally likely)? How should the
contingent liability be accounted for? (1 point)

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