On November $25,2023,$ an explosion occurred at a Rex Co$.$ plant, causing extensive property damage to area buildings.

By March $10,2024,$ claims had been asserted against Rex. Rex's management and counsel concluded that it is probable Rex will be responsible for damages, and that $$3,500,000$ would be a reasonable estimate of its liability. Rex's $$10,000,000$ comprehensive public liability policy has a $$500,000$ deductible clause.

Rex's December $31,2023,$ financial statements, issued on March $25,2024,$ should report this item as:

A$)$ A footnote disclosure indicating the probable loss of $$3,500,000.$

B$)$ An accrued liability of $$3,500,000.$

C$)$ An accrued liability of $$500,000.$

D$)$ A footnote disclosure indicating the probable loss of $$500,000.$