CMI sells a product that carries a three$-$year warranty. Estimated warranty costs as percentage of

sales are $1\%$ in the first year of warranty, $2\%$ in the second, and $2\%$ in the third. Sales and actual

warranty claims for the years ended December $31,2017$ through $2019$ are as follows:

Sales

Actual

Warranty

Claims

$2017$ $$150,000$ $$3,250$

$2018180,0006,250$

$2019100,0005,000$

$1.$ What is the warranty expense in $2018?$ Show your work.

$2.$ Suppose the beginning balance in the warranty reserve liability account on January $1,2017$

was $$4,000.$ What amount should CMI report as its warranty liability on its December $31,2019,$

balance sheet? Show your work.

$3.$ Is warranty a contingent liability? Explain.