The following note accompanied the financial statements for Goodyear Tire and Rubber Company (GT):

We have recorded liabilities totaling $316 million, including related legal fees expected to be incurred, for potential product liability and other tort claims, including asbestos claims . . . . General and product liability and other litigation liabilities are recorded based on management’s assessment that a loss arising from these matters is probable . . . . Typically, these lawsuits have been brought against multiple defendants in Federal and state courts.

a. Illustrate the effects on the accounts and financial statements of recording the contingent liability of $316,000,000.

b. Why was the contingent liability recorded?