Exercise $8-14($Algo$)$ Determine proper treatment of a contingent liability $($LO$8-5)$

Great Lakes Cruise Lines is a defendant in litigation involving a swimming accident on one of its three cruise ships.

Required:

The likelihood of a payment occurring is probable, and the estimated amount is $$1\mathrm{.}26$ million.

The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $$1\mathrm{.}06$ to $$1\mathrm{.}26$ million.

The likelihood of a payment occurring is reasonably possible, and the estimated amount is $$1\mathrm{.}26$ million.

The likelihood of a payment occurring is remote, while the estimated potential amount is $$1\mathrm{.}26$ million.