Clean-All Inc. sells, on account, washing machines with a 3-year assurance-type warranty. In the past, Clean-All has found that in the year after sale, warranty costs have been 3% of sales; in the second year after sale, 5% of sales; and in the third year after sale, 7% of sales. The following data are also available:

Year	Sales	Warranty
		Expenditures
2016	$500,000	$62,000
2017	650,000	82,000
2018	700,000	85,000

	Required:
1.	Prepare the journal entries for the preceding transactions for 20162018. Closing entries are not required.
2.	What amount would Clean-All report as a liability on its December 31, 2018, balance sheet, assuming the liability had a balance of $88,200 on December 31, 2015?
3.	Next Level How would the failure to recognize a contingent liability affect the financial statements?