Pitt Company is the defendant in a lawsuit filed by Hoffman in 2020 disputing the validity of a copyright held by Pitt. At December 31, 2020, Pitt determined that Hoffman would probably be successful against Pitt for an estimated amount of \(\$ 800,000\). Appropriately, an \(\$ 800,000\) loss was accrued by a charge to income of Pitt for the year ended December 31, 2020. On December 15, 2021, Pitt and Hoffman agreed to a settlement providing for cash payment of \(\$ 500,000\) by Pitt to Hoffman and transfer of Pitt's copyright to Hoffman. The carrying amount of the copyright on Pitt's accounting records was \(\$ 120,000\) at December \(15,2021\).

a. What would be the effect of the settlement of this liability on Pitt's income before income tax in 2021 ?

b. Record the entry on December 15, 2021 for Pitt Company.