8.Merleau Entertainment sells televisions and other sound and video equipment. Sales and expected warranty claims for the year are as follows:

Item Unit Sales Expected Warranty Claims Cost per Claim

for Warranty Period

Televisions 400 3 claims per 100 sold $40

DVDs 120 1 claims per 20 sold 76

Speakers 900 2 claims per 100 sold 22

Required:

1. Prepare the entry to record warranty expense for Merleau Entertainment for the year.

2. Conceptual Connection: Why does Merleau have to record a liability for future warranty claims?