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Assume that a lawsuit for environmental damages was filed in Year One. Ralston officials assess the situation and believe that a loss is probable and that $500,000 is a reasonable estimation of the amount that will eventually have to be paid, as a result of this litigation. Although this balance is only an estimate and the case may not be finalized for some time, the contingent loss is recognized in Year One and requires Ralston to record: Estimated Liability from Lawsuit debit $500,000 - Liability from Lawsuit Payable credit $500,000 Environmental Liability Expense debit $500,000 - Cash credit $500,000 Cash debit $500,000 - Environmental Liability Payable credit $500,000 O Loss from Lawsuit $500,000 debit - Estimated Liability from Lawsuit $500,000 credit