137. Rotary Tools sells power tools and backs each product it sells with a one-year warranty against defects. Based on previous experience, the company expects warranty costs to be approximately 5% of sales. By the end of the first year, sales and actual warranty expenditures are $800,000 and $13,000, respectively. 1. Does this situation represent a contingent liability? Why or why not? 2. Record warranty expense and warranty liability for the year based on 5% of sales. 3. Record the reduction in warranty liability and the reduction in cash of $13,000 incurred during the year. 4. What is the balance in the Warranty Liability account after the entries in parts 2 and 3