3.) During the year, Kingbird was sued by a competitor for a patent violation. The competitor is claiming that Kingbirds liability is $2,400,000. Kingbirds attorneys have advised it that it is probable that the court will find for the companys competitor. The attorneys estimate that the liability under the suit could be as little as $96,000 or as much as $480,000. The attorneys do not believe any amount within this range is a better estimate of Kingbirds liability than any other amount within the range.

For the question above, if there is a range for the lawsuit, as in the example above, do you still record this as a lawsuit liability (or no entry) ? If so, what would you record and why ?

4.) Kingbird provides one-year warranties on the laptops it sells. During the year, Kingbirds laptop sales totaled $96,000,000. Historically, Kingbirds warranty liability has been one percent of total sales. Kingbird began the year with a warranty liability balance of $770,000. Warranty expenditures during the year were $745,000 for computers sold in prior years and $230,000 for computers sold during the year. These expenditures were recorded as credits to cash and debits to the warranty liability account. Any remaining warranty liability is expected to relate to computers sold during the current year.

I know the estimated warranty liability is $960,000 for the year. I worked out part of the problem ( I think it is right so far, if not please correct me), and then does the 230,000 get debited from the warranty liability in this t chart?

Warranty Liability
Dr	Cr
	Bal beg of year 770,000
Warranty cost incurred from past years transactions 745,000
	Bal. 25,0000
	Estimated Warranty cost 960,000
	Bal. (960,000-25,000) = 935,000