Sound Portal Corporation sells stereos under a 2-year warranty contract that requires Sound Portal to replace defective parts and provide free labor on all repairs. During 2012, 1,290 units were sold at $950 each. In 2013, Sound Portal sold an additional 1,100 units at $980. Based on past experience, the estimated 2-year warranty costs are $25 for parts and $30 for labor per unit. It is also estimated that 40% of the warranty expenditures will occur in the first year and 60% in the second year. Actual warranty expenditures were as follows:

....................................................................................2013............ 2014

Stereos sold in 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,500......... $37,800

Stereos sold in 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -............ 28,200

Instructions:

Assuming that sales occurred on the last day of the year for both 2012 and 2013, give the necessary journal entries for the years 2012 through 2014. Analyze the warranty liability account for the year ended December 31, 2014, to see whether the actual repairs approximate the estimate. Should Sound Portal revise its warranty estimates?