f The following selected transactions relate to contingencies of Classical Tool Makers, Inc., which began operations in July $2021.$

Classical's fiscal year ends on December $31.$ Financial statements are issued in April $2022.$

Classical's products carry a one$-$year warranty against manufacturer's defects. Based on previous experience, warranty costs are

expected to approximate $4\%$ of sales. Sales were $$3\mathrm{.}0$ million $($all credit$)$ for $2021.$ Actual warranty expenditures were $$51,800$ and

were recorded as warranty expense when incurred.

Although no customer accounts have been shown to be uncollectible, Classical estimates that $2\%$ of credit sales will eventually

prove uncollectible.

In December $2021,$ the state of Tennessee filed suit against Classical, seeking penalties for violations of clean air laws. On January

$23,2022,$ Classical reached a settlement with state authorities to pay $$2\mathrm{.}5$ million in penalties.

Classical is the plaintiff in a $$5\mathrm{.}0$ million lawsuit filed against a supplier. The suit is in final appeal and attorneys advise that it is

virtually certain that Classical will win the case and be awarded $$3\mathrm{.}5$ million.

In November $2021,$ Classical became aware of a design flaw in an industrial saw that poses a potential electrical hazard. A product

recall appears unavoidable. Such an action would likely cost the company $$600,000.$

Classical offered $$25$ cash rebates on a new model of jigsaw. Customers must mail in a proof$-$of$-$purchase seal from the package

plus the cash register receipt to receive the rebate. Experience suggests that $60\%$ of the rebates will be claimed. Eleven thousand

of the jigsaws were sold in $2021.$ Total rebates to customers in $2021$ were $$115,000$ and were recorded as promotional expense

when paid.

Required:

$1-$a Prepare the year$-$end entries for any amounts that should be recorded as a result of each of the above contingencies.

$1-$b Indicate whether a disclosure note is needed for the above transactions.

Complete this question by entering your answers in the tabs below.

Prepare the year$-$end entries for any amounts that should be recorded as a result of each of the above contingencies. $($If no entry is

required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field. Enter your answers in whole dollars.$)$

Journal entry worksheet

Record any necessary year$-$end entry related to the warranties.

Note: Enter debits before credits.