Kenneth has the following potential liabilities:

Donald, a former employee, has sued Kenneth for $$1,080,000.$ Kenneth contacted his attorney, and the case is believed to be

frivolous.

Carter sued Kenneth for an undisclosed amount for a class action lawsuit. Kenneth thinks it's frivolous, but his attorneys

indicate a loss is probable for $$108,000.$

Steven sued Kenneth because he slipped outside of Kenneth's store. The claim is $$324,000$ and Kenneth is certain he will lose

the case but believes Steven will settle. The attorneys agree and based on conversations with Steven's attorneys, have stated

that it is remote the claim will be settled for $$313,200.$ Steven's attorneys indicated he would be willing to accept either cash

of $$297,000$ or shares of Kenneth's closely$-$held common stock currently valued at $$286,200.$ Kenneth would prefer not to

settle in cash.

Kenneth is suing Donald for $$324,000$ because Donald is in violation of a non$-$compete agreement he has with Kenneth.

Kenneth is certain he will win and so are his attorneys. In addition, Donald has privately admitted to Kenneth could be right,

but Donald intends to fight it$.$

None of the above have been settled as of December $31,2025.$ Prepare the necessary entry to record the liability and receivable, if

any, for the situations above. $($Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry

is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. List debit entry before credit entry.$)$

Account Titles and Explanation

Debit

Credit