for each of the following situation, select whether

For each of the following situations, select whether the company should (a) report a liability on the balance sheet. (b) disclose a contingent liability in the footnotes, or (not report the situation. Decision Situation An automobile company introduces a new car. Past experience demonstrates that lawsuits will be filed as soon as the new model is involved in any accidents. The company believes it is highly probable that at least one jury will award damages to people injured in an accident, but it is unable to estimate the amount of any payout. A research scientist determines that the company's best-selling product may infringe on another company's patent. If the other company discovers the infringement and files suit, which is unlikely. your company could lose millions As part of land development for a new housing project, your company has polluted a natural lake. Under state law, you must clean up the lake once you complete development. The development project will take five to eight years to complete. Current estimates indicate that it will cost $3 million to clean up the lake. Your company has just been notified that it is being sued by a customer. The probability of the customer winning is deemed to be probable, but the amount of any loss cannot be reliably estimated. A key customer is unhappy with the quality of a major construction project. The company believes 5. that the customer is being unreasonable but, to maintain goodwill, has decided to do $250,000 in repairs next year. disclose a contingent liability in the footnotes not report the situation report a liability on the balance sheet