g Cupola Awning Corporation introduced a new line of commercial awnings in 2021 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 $5,800,000 $51,000 Required: 1. Does this situation represent a loss contingency? 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 2021. 3. What amount should Cupola report as a liability at December 31, 2021?

1. Does this situation represent a loss contingency?

since warranty liabilities are both probable and can be measured, yes, they are considered loss contingencies

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 2021.

to record sales revenue

Dr Accounts receivable 5,800,000

    Cr Sales revenue 5,800,000

to record warranty liability

Dr Warranty expense 174,000

    Cr Warranty liability 174,000

warranty liability = $5,800,000 x 3%

to record actual warranty expenditures

Dr Warranty liability 51,000

    Cr Cash/inventory/wages payable 51,000

3. What amount should Cupola report as a liability at December 31, 2021?

Warranty liability account's balance on December 31, 2021 = $174,000 - $51,000 = $123,000

answer; measurable outcome;

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans. 

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.