Quayle Company has been sued by a customer who claims injury from use of Quayle's product. The company's lawyers and a consultant believe the likelihood of a judgment against Quayle is remote. What should Quayle do to account for this potential liability?
Recognize the liability and report it on the balance sheet.
Provide disclosure in the footnotes to the financial statements.
Report an allowance account on the balance sheet.
Do nothing.