1. In late 2018, Macrosoft Company was sued for patent infringement related to a new software product. At year-end, the companys attorney advises that a loss is probable under this lawsuit, but it is not currently possible to reasonably estimate such amount.

a. What treatment would this contingent liability receive in the companys December 31, 2018 financial statement?

b. Assume the same facts as above, but assume that this lawsuit was settled for $5 million after the end of the year, but before the financial statements were issued. How would your answer above change?