Warranties}

In 2018, BMJ Plumbing Company sold 300 water heaters for \(\$ 850\) each. The water heaters carry a two-year warranty for repairs. BMJ Plumbing estimates that repair costs will average \(1 \%\) of the total selling price.

\section*{Required:}

1. How much is recorded in the warranty liability account as a result of selling the water heaters during 2018, assuming no warranty service has yet been performed?

2. Prepare the necessary adjusting entry at December 31,2018 .

\section*{Cornerstone Exercise