Discuss the proper accounting treatment for each of the following three independent situations. Give your rationale for the answers.

1. A lawsuit for breach of contract seeking damages of $3,000,000 was filed by an author against James Publishers on December 1, 2023. The companys legal counsel believes an unfavorable outcome is probable. A reasonable estimate of the award to the author is probable and a reasonable estimate of the award is between $1,000,000 and $2,500,000. No amount within this range is a better estimate of potential damages than any other amount.