As of December 31, 2024, Duffy Company believed it was probable that an unfavorable outcome would result from a dispute with the Massachusetts State tax authorities. In-house tax experts estimated that Duffy would owe between $2113 - $4362 of additional taxes, with $3369 being the most likely amount.

What is the journal entry, if any, that Duffy should record to reflect this in the 2024 financial statements?

a.

A journal entry is not booked since this is a gain contingency.

b.

Debit to Contingent Loss for $3369; Credit to Contingent Liability for $3369

c.

Debit to Contingent Loss for $2113; Credit to Contingent Liability for $2113

d.

Debit to Contingent Liability for $4362; Credit to Contingent Loss for $4362