X Company considers it possible that it will lose a lawsuit it is currently involved in and will have to pay damages of $50 million. X Company is required to: 1. Disclose in a footnote to the financial statements that it expects to pay $50 million. 2. Record a liability for $25 million, and disclose in a footnote the existence of the lawsuit. 3. Record a liability for $50 million. 4. No action is required because X may still win the lawsuit. 0 1 O 2 03 04