Darren Company Becomes Aware of a Lawsuit After the Date

Multiple Choice

Darren Company becomes aware of a lawsuit after the date of the financial statements, but before they are issued. A loss and related liability should be reported in the financial statements if the amount can be reasonably estimated, an unfavorable outcome is highly probable, and

A) the Darren Company admits guilt.
B) the court will decide the case within one year.
C) the damages appear to be material.
D) the cause for action occurred during the accounting period covered by the financial statements.