Atomby Entertainment Limited (AEL) sells multimedia presentation systems in Hong Kong. The company commenced business in 2018. Each product unit was sold for $5,000 cash representing a 25% markup over cost. The company provides a two-year parts and labour warranty on each product unit they sell. The estimated cost of providing the warranty coverage is $400 per unit. Apart from the assurance warranty, AEL also sells extended warranty services to customers. Such service warranty must be purchased at the same time as the related product is purchased, at a fee of $750 per unit. The service warranty will cover another 2 years after expiration of the assurance warranty provided by AEL. Approximately 70% of customers purchased the service warranty in 2018, and 80% in 2019 and 2020. Accounting year end date of AEL is December 31. (a) The following table shows the number of product units sold between 2018 and 2020, and the related parts inventory and labour expenses incurred: Year Units sold Expenses (2018) Expenses (2019) Expenses (2020) 2018 1,000 $170,000 ($50,000 for $215,000 ($70,000 $155,000 ($75,000 for parts inventory, for parts inventory, parts inventory, $120,000 for labour) $145,000 for labour) $80,000 for labour) 2019 1,400 $240,000 ($80,000 for $350,000 ($100,000 parts inventory, for parts inventory, $160,000 for labour) $250,000 for labour) 2020 1,800 $425,000 ($130,000 for parts inventory, $295,000 for labour) Required: Explain briefly how AEL should account for the assurance and service warranties provided. Prepare the necessary journal entries from years 2018 to 2020, and an extract of the statement of financial position for 2020 showing the warranty-related items. Assume warranty liabilities can be carried forward to at most two years after they are recognized. Use financial year end date for all journal entries