Exercise 8-14 (Algo) Determine proper treatment of a contingent liability (LO8-5)

Atlantic Cruise Lines is a defendant in litigation involving a swimming accident on one of its three cruise ships.

Required:

1. The likelihood of a payment occurring is probable, and the estimated amount is $1.28 million.

2. The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $1.08 to $1.28 million.

3. The likelihood of a payment occurring is reasonably possible, and the estimated amount is $1.28 million.

4. The likelihood of a payment occurring is remote, while the estimated potential amount is $1.28 million.

Record the necessary entry for the scenarios given above. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions. For example, $5.5 million should be entered as 5,500,000.)