Welnet Inc. was sued in October of 20x8 for breach of contract. Based on the advice of counsel, Welnet recognized a $2 million estimated lawsuit loss and liability at December 31, 20x8. The lawsuit was settled in February, 20x9 in the amount of $2.2 million, before Welnet's 20x8 financial statements were available to be issued. What is the appropriate accounting procedure for the 20x8 statements? Welnet recognizes the entire $2.2 million loss in its 20x9 statements. Welnet reports the $0.2 million amount as a retrospective adjustment to its 20x8 statements. Welnet recognizes the entire $2.2 million loss in its 20x8 statements. Welnet recognizes $0.2 million of lawsuit loss in its 20x9 statements.