Rotary Tools sells power tools and backs each product it sells with a one-year warranty against defects. Based on previous experience, the company expects Warranty costs to be approximately 6% of sales. By the end of the first year, sales are $750,000. Actual warranty expenses incurred so far are $12,000, 1. Does this situation represent a contingent liability? 50-53 Yes No 2. & 3. Record the appropriate journal entries for the warranties. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction ist Journal entry worksheet