1) If a contingent liability is probable and the amount of the liability can be reasonably estimated, it is _____.

not recorded but disclosed

recorded and disclosed

not recorded and not disclosed

recorded but not disclosed

2) Assume that during May, a company sold a product for $160,000 that includes a 36-month warranty. Historically, the average cost of repairs over the warranty period is 7% of the sales price. The entry to record the estimated product warranty expense would include _____.

a debit to Product Warranty Expense for $11,200

a credit to Cash for $11,200

a debit to Product Warranty Payable for $11,200

None of these are correct.