A firm sells a remarkable product, which serves many household purposes. The firm is confident

about its product and is so anxious to sell a large number of units that it grants a $3-$year warranty.

The warranty agreement specifies that any malfunction or other problem will be fixed at no cost

to the customer unless the customer has abused the product. Based on experience with other

household products it has sold in the past, $3\%$ of total units sold will require service over the

warranty period at an average cost of $$200$ per unit. The following information relates to the first

two years of the product's life:

Year $1$ Year $2$

Unit sales $20,0005,000$

Actual warranty costs incurred $$35,000$ $$80,000$

a$)$ Record the warranty journal entries for both year $1$ and year $2$

b$)$ What is the balance of the warranty liability account at January $1,$ Year $3?$ Assume that

the company did not revise its estimate of future warranty claims frequency