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Determine which of the following transactions represent contingent liabilities for Pali Gap Rental and indicate the proper accounting treatment at the company's fiscal year-end, by placing the letter of the correct accounting treatment in the space provided.

a. Accrue a liability and disclose in the financial statement notes

b. Disclose in the financial statement footnotes only

c. No disclosure

1.	Pali Gap Rental cosigned a loan for $100,000 due in one year for Lightening Company. Lightening is a very profitable company and is very liquid, making it a remote chance Pali Gap will have to pay the loan
2.	Pali Gap Rental filed a lawsuit against Jane Rental for trademark infringement. Pali Gaps legal counsel believes it is probable that Pali Gap will win the suit and estimates the settlement to be $6,000,000.
3.	One of Pali Gaps rental tents collapsed at a wedding and injured the bride and groom. Pali Gaps legal counsel believes it is probable that Pali Gap will have to pay damages of $1,000,000.
4.	Pali Gap Rental is being audited by the Internal Revenue Service. Its tax returns for the past two years are being examined. At the company's year-end, the audit is still in process. Pali Gaps CPA believes that payment of significant taxes is possible.

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