Tweedie Company introduced a new line of commercial awnings in 2020 that carry a two-year warranty against manufacturer's defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 3% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Sales Actual Warranty Expenditures $5,000,000 Required: $37,500 1. Does this situation represent a loss contingency? Why or why not? How should Tweedie 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 2020. 3. What amount should Tweedie report as a liability at December 31, 2020?