During Year $1,$ Ward Company introduced a new product carrying a two$-$year warranty against defects, which is included in the selling price of the product. The estimated warranty costs are $2\%$ of sales within the first $12$ months following the sale and $4\%$ in the second $12$ months following the sale. Sales and actual warranty expenditures for the years ended December $31$ of Year $1$ and Year $2$ follow.

Actual Warranty

Sales Expenditures

Year $1$ $$1,560,000$ $$23,400$

Year $22,600,00078,000$

$$4,160,000$ $$101,400$

Required

a$.$ Record the entries in Year $1$ to $(1)$ record actual cash warranty costs and $(2)$ accrue for warranties at year$-$end. At December $31$ Year $1,$ what would Ward report as estimated warranty liability on its balance sheet? $Answer

c$.$ Record the entries in Year $2$ to $(1)$ record actual cash warranty costs and $(2)$ accrue for warranties at year$-$end.