In April $2024,$ an explosion occurred at Howe Co$.\text{'}$s plant, causing

damage to area properties. By July $2024,$ several claims had been

asserted against Howe. Howe's legal counsel concluded that it was

probable that Howe would be held responsible for the damages and

that $$400,000$ would be a reasonable estimate of the damages. The

claims are expected to be resolved by March $2027.$ In Howe's

December $31,2024$ financial statements, how should this casualty

be reported?

Accrued a loss of $$400,000$ on the income statement and accrued a

liability of $$400,000$ on the balance sheet.

No note disclosure of accrual will be fequired for $2024$ because the claims

will not be resolved until $2027.$

Accrued a loss of $$400,000$ on the income statement only without any

effects on the balance sheet.

As a note disclosing a probable liability of $$400,000.$