sng E3-2ZA(Learning objectives 1, S: Keport a contingent liahility)Smith Security Systems' revenues for 2012 totaled $25.8 million. As with most companies, Smith is a defendant in lawsuits related to its products. Note 14 of the Smith Annual Report for 2012 reported the following 14. Contingencies The company is involved in various legal proceedings....It is the Company's policy to accrue for amounts related to these legal matters if it is probable that a liability has been incurred and an amount is reasonably estimable. Suppose Smith's lawyers believe that a significant legal judgment against the company is reasonably possible. How should Smith report this situation in its financial statements? Suppose Smith's lawyers believe it is probable that a $3 million judgment will be rendered against the company. Report this situation in Smith's financial statements. Journalize any entry requirements by GAAP. Explanations are not required. 1. 2