Question: Under which of the following circumstances would an entity be expected to accrue a loss contingency for the period under audit? Legal counsel communicated that an unfavorable judgment from current litigation was reasonably possible. The entity recorded the amount of an asset impaired as of the balance sheet date. A reasonable estimate was determined for a liability incurred after the balance sheet date. The entity estimated the amount of a claim with a probable adverse outcome before issuance of the audit report.