P$11-46.$ Accounting for contingencies $($Medium $-20$ minutes$)$The following are two independent situations. The underlined entity is the reporting entity$\mathrm{.}1.$ Broken Horse Stables Inc. sued Topnotch Equestrian Inc, for $$1$ million alleging breach of contract. Topnotch's legal counsel estimates that Broken Horse's likelihood of success is about $55\%.$ Based on its experience with cases of this nature, the law firm suggests that if the litigant is successful then it will be awarded $$600,000$ to $$800,000,$ with all payouts in this range being equally likely$\mathrm{.}2.$ Meagan Morton broke her arm when she slipped on the ice in front of the office of Boondoggle Inc. On the advice of legal counsel, Boondoggle has offered Morton $$200,000$ to settle her $$400,000$ lawsuit. It is unknown whether Morton will accept the settlement offer. Boondoggle's legal counsel estimates that Morton has a $75\%$ probability of success, and that if successful, she will be awarded $$200,000$ to $$300,000,$ with all payouts in this range being equally likely.Required:a$.$ Assuming that the reporting company prepares its financial statements in accordance with IFRS:i$.$ For each of the two situations described above, indicate whether the appropriate accounting treatment is to:A$.$ Recognize a liability.B$.$ Disclose the details of the contingency in the notes to the financial statements.ii$.$ For each situation that requires the recognition of a liability, record the journal entry.b$.[$ASPE$]$ Assuming that the reporting company prepares its financial statements in accordance with ASPE:i$.$ For each of the two situations described above, indicate whether the appropriate accounting treatment is to:A$.$ Recognize a liability.B$.$ Disclose the details of the contingency in the notes to the financial statements.li$.$ For each situation that requires the recognition of a liability, record the journal entry.