A company sells its product subject to a warranty that covers the cost of parts and labour for repair during the six months after sale. The 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.

Required

1. Prepare the journal entries:

- an estimation of the warranty

- a year-end entry for the warranty

2. If the Estimated Warranty Liability account had a $10,000 credit balance on May 31, calculate the account balance as of June 30?