Kenji is attempting to learn French. He is seated in a library with headphones on, listening to classical music, as he stares at a textbook and tries to memorize French words. In a single moment, a new song comes on that Kenji particularly enjoys, and he suddenly finds it easier to remember the French words he is looking at. In this moment, the French words are being processed by Kenji's , while the music is being processed by Kenji's .

The following legal claims exist for m. finger co. identify the accounting treatment for each claim as either (a) a liability that is recorded or (b) an item described in notes to its financial statements. 1. m. finger (defendant) estimates that a pending lawsuit could result in damages of $1,250,000; it is reasonably possible that the plaintiff will win the case. an item described in notes to its financial statements. a liability that is recorded. 2. m. finger faces a probable loss on a pending lawsuit; the amount is not reasonably estimable. a liability that is recorded. an item described in notes to its financial statements. 3. m. finger estimates damages in a case at $3,500,000 with a high probability of losing the case. an item described in notes to its financial statements. a liability that is recorded. the amount that m. finger co. should record in its accounting records related to these suits is: