On November 7,2014 local residents sued Brimley Corporation for excess chemical emissions that caused some of them to seek medical attention.The total lawsuit is $8,000,000.Brimley Corporation's lawyers believe that the lawsuit will be successful and that the amount to be paid to the residents will be $4,000,000.On its December 31,2014 financial statements Brimley should:

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Brimley Corporation should accrue a provision loss of $4,000,000 in its December 31, 2014 financial statements, and disclosure is not necessary. The corporation's lawyers believe that the lawsuit will be successful, and it is prudent to recognize the estimated loss in the financial statements. The provision loss represents the amount that Brimley Corporation is expected to pay to the local residents as a result of the excess chemical emissions. The provision loss is a liability and should be recorded in the balance sheet, and the corresponding expense should be recognized in the income statement. Since the amount to be paid is less than the total lawsuit, there is no need to disclose the full amount of $8,000,000 in the financial statements.

On November 7,2014 Local Residents Sued Brimley Corporation for Excess