Under what condition is a pending lawsuit recognized as a liability on a company's balance sheet?

Multiple Choice

The outcome is reasonably possible.

The outcome is probable and can be reasonably estimated.

The amount can be reasonably estimated.

The outcome is probable.

Assets and liabilities would both increase by $$194,000.$

Assets would increase by $$194,000$ and liabilities would increase by $$200,000.$

Assets would increase by $$200,000,$ and liabilities would increase by $$194,000.$