1) Action Travel has 10 employees each working 40 hours per week and earning $200 an hour. Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the total payroll tax expense for the first week of January?

2) 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. What is the accounting treatment to the lawsuit for Amplify, Inc. and Sound City respectively?