raduate P8-51B. (Learning Objectives 4,5: Account for estimated warranties payable; account for contingent liabilities) Bennett Go-Karts sells motorized go-karts. Bennett Go-Karts are motorized and are typically purchased by amusement parks and other recreation facilities, but are also occasionally purchased by individuals for their own personal use. The company uses a perpetual inventory system. Selected transactions in the month of December follow: December 1 Bennett sold 12 go-karts on account. The selling price of each go-kart was $1,100; the cost of goods sold for each was $300. 5 Bennett received notice of a class-action lawsuit being filed against it. The lawsuit claims that Bennett's go-karts have engine defects that appear after the warranty period expires. The plaintiffs want Bennett to replace the defective engines and pay damages for the owners loss of use. The cost of replacing the engines would be approximately $300,000 (not including any damages). Bennett's attorney believes that it is reasonably possible that Bennett will lose the case, but the attorney cannot provide a dollar estimate of the potential loss amount. 20 Bennett performed repairs due to product warranty complaints for two go-karts sold earlier in the year. Bennett's cost of the repairs, paid in cash, was $700. 22 An individual claims that he suffered emotional distress from a high-speed ride on a Bennett Go-Kart and is seeking $200,000 in damages. Bennett's attorney believes the case is frivolous because it does not have any legal merit. 27 Another customer is suing Bennett for $100,000 because a defect in the customer's Bennett Go-Kart engine started a fire and destroyed the customer's garage. Bennett's attorney believes the customer will probably win the case and receive $100,000. (Use the following account names: Loss from Lawsuit and Accrued Liability from Lawsuit.) 31 Bennett estimates that the warranty expense is 4% of gross sales. Bennett's gross sales for the period totaled 5800,000 Requirements 1. Prepare the journal entries to record the transactions shown. Omit explanations. 2. Describe how each of the contingent liabilities in the selected December transactions would be treated in Bennett's financial statements for 2019.