Fox Co. became involved in a tax dispute with the IRS, and at December 31, Year 2, Fox's tax advisor believed that there was an 70% chance that the outcome would be unfavorable, and that a reasonable estimate of additional taxes was $250,000. After the financial statements were issued, Fox received and accepted an IRS settlement offer of $300,000.

What amount of accrued liability should Fox have reported in its December 31, Year 2 balance sheet?

$300,000

$175,000

$250,000

$210,000