$q,7$ During $2005,$ Tedd Co$.$ became involved in a tax dispute with the IRS. At December $31,2005,$ Teddis tax advisor believed that an unfavorable outcome was probable.

A reasonable estimate of additional taxes was $$200,000$ but could be as much as $$600,000.$

After the $2005$ financial statements were issued, Tedd received and accepted an IRS settlement offer of $$450,000.$

What amount of accrued liability should Tedd have reported in its December $31,2005$ balance sheet?

a$.$ $$200,000$

b$.$ $$450,000$

c$.$ $$500,000$

d$.$ $$600,000$