Loretta Inc. is being sued by one of its customers for $1,000,000. It is probable that Loretta will lose and have to pay the full amount. The case will be resolved in the next 12 months. What is the correct accounting treatment?*

2 points

a. A brief description of the lawsuit is disclosed in the notes

b. Record a current liability of $1,000,000

c. Record a non-current liability of $1,000,000

d. Decrease Retained Earnings by $1,000,000

e. c and d