First, let's decide how the lawsuit should be reported in the financial statements.

The lawsuit should $[$

statements $($using U$.$S$.$ GAAP$)?$

Pine would report

on the

and

on the

Requirements

Suppose Pine's lawyers believe that a significant legal judgment against the

company is reasonably possible. How should Pine report this situation in its

financial statements?

Suppose Pine's lawyers believe it is probable that a $$2\mathrm{.}1$ million judgment will

be rendered against the company. In general terms, how would this situation

be reported in Pine's financial statements $($using U$.$S$.$ GAAP$)?$