The Femaware Company uses the allowance method to account for bad debts. At the beginning of year 1, the allowance account had a credit balance of $66,844. Credit sales for year 1 totaled $2,139,000 and the year end accounts receivable balance was $436,713. During this year, 65,061 in receivables were determined to be uncollectible. Femaware anticipates that 4% of all credit sales will ultimately become uncollectible. The fiscal year ends on December 31. Required: 1. Does this situation describe a loss contingency? Explain. 2. What is the bad debt expense that Femaware should report in its year 1 income statement? 3. Prepare the appropriate journal entry to record the contingency. 4. What is the net realizable value (book value) Femaware should report in its year 1 balance sheet? Duplot Awning Corporation introduced a new line of commercial awnings in year 1 that carry a two-year warranty against manufacturer's defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 2% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Sales Actual Warranty Expenditures $4,361,000 $21,805 Required: 1. Does this situation represent a loss contingency? Why or why not? How should Duplot account for it? 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 year 1. 3. What amount should Duplot report as a liability at December 31, year 1