Case $5$:

At the end of the year $20$XX$,$ Company $C$ noted that the Company has been assigned by client $x$ for quality issues on certain product delivered to the client. The client claims for losses in relation to the quality issue of EUR $2,000,000.$ The lawyer of the Company is in the opinion that the risk is not remote but should be limited to EUR $1\mathrm{.}500,000.$

Moreover, the client has not paid the invoice in relation to other products for EUR $300,000.$ This invoice is aged $7$ months. The policy of Company $C$ is as follows:

Invoice not paid after $3$ months: allocation to doubtful amount for $50\%$

Invoice not paid after $6$ months: allocation to doubtful amount for $100\%($full write$-$off$)$

On $30$ September $20x+1,$ the Company reaches an agreement with client $x$ by paying an amount of EUR $1,250,000$ and the client agrees to pay the invoice of EUR $300,000$ in full.

Pass the corresponding journal entries at the end of the year and the year after when the agreement is reached.