Response to the following problem:
The following note accompanied recent financial statements for Goodyear Tire and Rubber Company:
We are a defendant in numerous lawsuits alleging various asbestos-related per¬sonal injuries purported to result from alleged exposure to certain asbestos prod¬ucts manufactured by us or present in certain of our facilities. Typically, these lawsuits have been brought against multiple defendants in state and federal courts. To date, we have disposed of approximately 90,700 claims by defending and obtaining the dismissal thereof or by entering into a settlement. The sum of our accrued asbestos-related liability, ... including legal costs totaled approxi¬mately S365 million through December 31, 2010. ...
a. Illustrate the effects on the accounts and financial statements of recording the contingent liability of $365,000,000.
b. Why was the contingent liability recorded?