The following legal claims exist for Huprey Co. Identify the accounting treatment for each claim as either ( a) a liability that is recorded or ( b) an item described in notes to its financial statements. Be sure to give the reasons for your decision and explain thoroughly.

1. Huprey ( defendant) estimates that a pending lawsuit could result in damages of $ 1,250,000; it is reasonably possible that the plaintiff will win the case.

2. Huprey faces a probable loss on a pending lawsuit; the amount is not reasonably estimable.

3. Huprey estimates damages in a case at $ 3,500,000 with a high probability of losing the case. [Wild, 2016]