Preferred Travel has the following transactions that may or may not require recognition of contingencies. Determine how to deal with the transactions. $$ During the year, Preferred Travel sold high$-$end travel accessories to customers who purchased its vacation packages. Preferred Travel offers a $2-$year assurance warranty for these accessories. The company sold the items for $$400,000$ and estimates that warranty costs will be $5\%$ of the amount sold. During the current year, it spent $$8,000$ in servicing warranty claims. $$ Cash$400000$ Warranty Expense$8000$ Sales Revenue$400000$ Cash, Inventory, Accrued Payroll$8000$ As a result of uninsured accidents during the year, personal injury suits for $$350,000$ and $$60,000$ have been filed against the company. It is the judgement of legal counsel that an unfavorable $$ outcome is unlikely in the $$60,000$ case but that an unfavorable verdict approximating $$250,000($reliably estimated$)$ will probably result in the $$350,000$ case.

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