Colby Motors uses the accrual method and reports on a calendar year. In December of last year, Colby

acquired auto repair equipment. As part of the acquisition, Colby purchased a warranty agreement that requires

the seller of the equipment to provide repairs on the equipment for three years. Colby paid the cost of the

warranty, $$15,000,$ in January of this year. What can Colby deduct for the cost of the warranty on the tax return

for last year?

Blackwell Manufacturing uses the accrual method and reports on a calendar year. This year a customer was

injured when visiting the Blackwell factory. The customer sued the company for $$500,000,$ and the case is still

being litigated. However, Blackwell's attorney expects that the company will pay at least $$250,000$ to settle the

claim. What amount, if any, can Blackwell deduct for the expected claim settlement this year?