The following selected transactions relate to contingencies of B.B. Kings Products Inc. which began operations in July, 2009. B.B. King's fiscal year ends on December 31. Financial statements are published in April 2016.

a. B.B. Kings offers a one-year warranty against manufacturer's defects for all its products. Industry experience indicates that warranty costs will approximate 2% of sales. Sales were $325 million (all credit) for 2015. Actual warranty expenditures were $3.8 million in 2015 and were already recorded as warranty expense when incurred.

b. In November, 2015, the State of Tennessee filed suit against B.B. Kings, asking civil penalties and injunctive relief for violations of a music lawsuit. B.B. Kings reached a settlement with state authorities to pay $4.2 million in penalties on February 3, 2016.

c. B.B. Kings is defending against a lawsuit with Les Paul Guitar Inc. Management believes it is probable that the company will lose this lawsuit. If B.B. King loses it is highly likely that the damages will be anywhere in the range of $3.5 million and $2.1 million.

d. B.B. King is defending against a lawsuit with Small Guitars Co. Management believes that it is probable the company will win this lawsuit for $1.35 million.

REQUIRED: Prepare any and all appropriate journal entries to record any amounts that should be recorded as a result of each of these contingencies and indicate whether a disclosure note is indicated for each situation.