Cupola Awning Corporation introduced a new line of commercial awnings in 2016 that carry a two-year warranty against manufacturer's defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 4% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Sales Actual Warranty Expenditures $43,750 $5,950,000 Required: 1. Does this situation represent a loss contingency? O No Yes 2. Prepare journal entries that summarize sales of the awnings (assume all credit sales) and any aspects of the warranty that should be recorded during 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet L No Event General Journal Debit Credit 1 1 Accounts receivable Sales 59,500,000 2 2 Warranty expense Estimated warranty liability 3 3 Estimated warranty liability Accounts receivable