During 2020, Ward Company introduced a new product carrying a two-year warranty against defects, which is included in the selling price of the product. The estimated warranty costs are \(2 \%\) of sales within the first 12 months following the sale and \(4 \%\) in the second 12 months following the sale. Sales and actual warranty expenditures for the years ended December 31, 2020, and 2021 are:

Required

a. At December 31,2020 , what would Ward report as estimated warranty liability on its balance sheet?

b. Record the journal entry required on December \(31,2020\).

c. At December 31, 2021, what would Ward report as estimated warranty liability on its balance sheet?

d. Record the journal entry required on December 31, 2021.

Transcribed Image Text:

Sales Actual Warranty Expenditures 2020.... 2021 $ 600,000 1,000,000 $1,600,000 $ 9,000 30,000 $39,000