Acme sells products with a 1-year warranty.Experience indicates that Acme incurs warranty costs equal to 0.75% of sales.At December 31, 2019, Acme reported a balance of $22,875 in its warranty liability account.During 2020, Acme reported sales of $2,683,500 of products covered by the warranty.Also during 2020, Acme spent $22,500 on warranty claims.

a.What will Acme report as warranty expense for 2020?

b.What will Acme report as warranty liability as of December 31, 2020?

Warranty liability as of 12/31/2019 22,875

2020 sales 2,683,500

Warranty claims paid in 2020 22,500

Estimated warranty cost 0.75%