CraneShoes Foot Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a45% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be $804000. What is the required journal entry as a result of this litigation?

Debit Litigation Expense for $804000and credit Litigation liability for $804000.

Debit Litigation Expense for $442200and credit Litigation Liability for $442200.

No journal entry is required.

Debit Litigation Expense for $361800and credit Litigation Liability for $361800.