Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its plants. As a result, the Environmental Protection Agency $($EPA$)$ fined the company $$248,000.$ The company is contesting the fine. In addition, an employee is seeking $$213,000$ in damages related to the spill. Lastly, a homeowner has sued the company for $$324,000.$ The homeowner lives $35$ miles from the plant but believes that the incident has reduced the home$$s resale value by $$324,000.$

Ayers$$ legal counsel believes that it is probable that the EPA fine will stand. In addition, counsel indicates that an out$-$of$-$court settlement of $$130,000$ has recently been reached with the employee. The final papers will be signed next week. Counsel believes that the homeowner$$s case is much weaker and will be decided in favor of Ayers. Other litigation related to the spill is possible, but the damage amounts are uncertain.

Required:

a$.$ Journalize the contingent liabilities associated with the hazardous materials spill. Use the account $$Damage Awards and Fines$$ to recognize the expense for the period.

b$.$ Prepare a note disclosure relating to this incident.