A company is involved with a lawsuit regarding a faulty product sold in a prior year. The company's lawyers have estimated it will probably lose the case. If the case is lost the company would have to pay 300,000.

What journal entry would be required to account for this situation?

a- Dr Lawsuit expenses 300,000 Cr Provision 300,000

b- Dr Lawsuit expenses 300,000 Cr Liability 300,000

c- No entry: only contingent asset disclosure

d- No entry: only contingent liability disclosure