Bonny and Klyde, INC. is facing a lawsuit brought against it by a motorist who was involved in an accident with Bonny and Klyde's delivery van last summer. Based on the facts of the case Bonny and Kyle believe it is probable that they will lose the case but do not have a good estimate of what the outcome (damages awarded by the court) could potentially be. How should this liability be reported in the financial statements?

	A.	They should record an expense or loss and a liability based on the estimated damages to be paid out.
	B.	They should describe the liability in the notes to the financial statements.
	C.	They should increase the cash account to prepare for a potential payment.
	D.	This liability should not be disclosed.