Computer Wholesalers restores and resells notebook computers. It originally acquires the notebook computers from corporations upgrading their computer systems, and it backs each notebook it sells with a 90-day warranty against defects. Based on previous experience, Computer Wholesalers expects warranty costs to be approximately 6% of sales. Sales for the month of December are $470,000. Actual warranty expenditures in January of the following year were $16,500.

1. Does this situation represent a contingent liability?

2. & 3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

4. What is the balance in the Warranty Liability account after the entries in Part 2 and 3?