Company A provided the following selected transactions related to contingencies. The fiscal year ends on December 31, 2023. Financial statements were issued on April 1, 2024.

a. In December 2023, Company A became aware of an engineering flaw in a product that poses a potential risk of injury. As a result, a product recall appears inevitable. This move would likely cost the entity P2,800,000.

b. In November 2023, the City B filed suit against the entity. The city government is asking civil penalties and injunctive relief for violations of clean water laws. Company A reached a settlement with the city government to pay P3,200,000 in penalties on February 15, 2024.

c. Company A is the plaintiff in a P4,000,000 lawsuit filed against a customer for costs and lost profit from contract rejected in 2023. The attorney advised that it is probable that Company A will be awarded P3,000,000. On March 20. 2024, Company A won the case and received P3,500,000.

1. What amount should be reported as accrued liability on December 31, 2023?

2. What amount should be reported as gain in 2023 as a result of the contingency?