Situation 3:  On October 1, 2020, the provincial environment...

Situation 3: On October 1, 2020, the provincial environment ministry identified Jackhammer Chemical Inc. as a potentially responsible party in a chemical spill. Jackhammer's management, along with its legal counsel, have concluded that it is likely that Jackhammer will be found responsible for damages, and a reasonable estimate of these damages is $7 million. Jackhammer's insurance policy of $14 million has a clause requiring a deductible of $700,000.

(a)

Assuming ASPE is followed, how should Jackhammer Chemical report this information in its financial statements at December 31, 2