Bugs, Inc., a wholly owned subsidiary of the U.S.-based company, Pillows Ltd., was notified of a loss contingency with an estimated cost ranging between $50,000 and $150,000. Bugs, Inc. hired an expert appraiser who assessed that all possible dollar amounts of liability in this range are equally likely. Management of Bugs, Inc. has estimated that there is a 60 percent chance that this contingency will result in an actual loss.

According to U.S. GAAP, what is the amount recognized by Bugs, Inc. as a provision for loss contingency?

Multiple Choice

• No amount will be recorded but an amount will be disclosed in the notes to the financial statements.

• $50,000

• $60,000

• $100,000

• $150,000