Clean Corporation manufactures and sells dishwashers. Clean provides all customers with a two-year warranty guaranteeing to repair, free of charge, any defects reported during this time period. During the year, it sold 100,000 dishwashers for $325 each. Analysis of past warranty records indicates that 12% of all sales will be returned for repair within the warranty period. Clean expects to incur expenditures of $14 to repair each dishwasher. The account Estimated Liability for Warranties had a balance of $120,000 on January 1. Clean incurred $150,000 in actual expenditures during the year.

Required

Identify and analyze the effect of the events related to the warranty transactions during the year. Determine the adjusted ending balance in the Estimated Liability for Warranties account.