Woodmier Lawn Products introduced a new line of commercial sprinklers in 2020 that carry a one-year warranty against manufacturer?s defects. Because this was the first product for which the company offered a warranty, trade publications were consulted to determine the experience of others in the industry. Based on that experience, warranty costs were expected to approximate 2% of sales. Sales of the sprinklers in 2020 were $2.5 million. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product:

In late 2021, the company?s claims experience was evaluated and it was determined that claims were far more than expected?3% of sales rather than 2%.

Required:1. Assuming sales of the sprinklers in 2021 were $3.6 million and warranty expenditures in 2021 totaled $88,000, prepare any journal entries related to the warranty.2. Assuming sales of the sprinklers were discontinued after 2020, prepare any journal entry(s) in 2021 related to the warranty.

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Accrued liability and expense Warranty expense (2% × $2,500,000) Warranty liability Actual expenditures (summary entry) Warranty liability Cash 50,000 50,000 23,000 23,000