Solve for 4&5

Cloud Company has a lawsuit pending from a customer claiming damages of $128,000. Cloud's attorney advises that the likelihood the customer will win is reasonably possible. How is this contingent liability reported? It should he recorded as an asset and a liability based on estimated amounts. It should he recorded as an expense and a liability based on estimated amounts. It should not he disclosed. It should he described in the footnotes. Tots Toy's owed estimated warranty payable of $7, 200 at the end of 2013. During 2014, Tots Toy's made sales of $280,000 and expects product warranties to cost the company 3% of the sales. During 2014, Tots Toy's paid $5,000 for warranties. What is Tots Toy's estimated warranty payable at the end of 2014? $10, 600 $5, 600 $5,000 $15, 600