Cupola awning corporation introduced a new line of commercial awnings in 2018 that carry a two-year warranty against manufacturer's defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 3% of sales. Sales and actual warranty expenditures for the first year of selling the product were:

Answer and Explanation:

1. Yes, this situation represents a loss contingency.

The occurrence of warranty liability is probable and the amount can be reasonably estimated so it represents a contingent liability.

2.

a. Accounts receivable Dr, $5,780,000

        To Sales $5,780,000

(Being the sales is recorded)

b. Warranty expense Dr, $173,400 (5,780,000 × 3%)

        To Estimated warranty liability $173,400

(Being the warranty expense is recorded)

c. Estimated warranty liability Dr, $38,500

         To Cash, wages payable, parts and supplies, etc. $38,500

(Being cash paid is recorded)

3 .Liability = $173,400 - $38,500

= $134,900

answer; i believe the correct answer is (a) motion for change of venue;

month 1 start amount =$3287.90 interest=(3287.90x0.0145/12)3.97 total to pay=$3291.81 paid =$1200 balance =$2,091.87

month 2 starting amount= $2,091.87 interest =$25.28 total to pay =$2117.15 paid =$1200 balance $917.15

month 3 starting amount =$917.15 interest =$11.08 total to pay =$928.23 paid =$928.23 balance =$0 total to pay 1200+1200+928.23 = $3328.23 it will take 3 months to pay a total of $3328.23