1. A company sells its product subject to a warranty that covers the cost of parts and labour for repairs during the six months after sale. warranty costs are estimated to be 3.5% of sales for parts, and 1.5% of sales for labour. During the month of June, the company performed warranty work and used $8,000 worth of parts and paid $4,000 in wages for labour to do the warranty work. Sales for June amounted to $450,000. a)What account should be debited for the $4,000 in labour? 2

b) What should be the amount of estimated warranty expense for June? 4

c) If the Estimated Warranty Liability account had a $10,000 credit balance on May 31, what should be the account balance as of June 30?