Amplify, Inc. was sued by Sound City for $50,000. Sound City feels very confident that it will win the case and will be awarded the full amount. Amplify, Inc. feels it is probable that it will lose the case and pay Sound City the full amount. Which of the following is correct?
A) Amplify, Inc. would record a loss and contingent liability for $50,000.
B) Sound City would record a gain and lawsuit receivable for $50,000.
C) Sound City would record nothing.
D) Amplify, Inc. would record a loss and contingent liability for $50,000 Sound City would record nothing.
Answer: D
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