Eisler Company sells Kitchen Aid stoves for $6,000 each. The price includes a two-year warranty. During 2021, the company sold 500 stoves. Based on past experience, the warranty costs are estimated to be $200 per stove. The actual warranty costs paid by Eisler during 2021 were $85,000.

Eisler has a December 31 fiscal year-end.

Instructions:

a) Prepare journal entries to record the estimated warranty expense and the actual warranty payments for the year on December 31, 2021. (2 marks)

b) Assume the warranty liability account had a debit balance of $10,000 on January 1, 2021. What is the balance on December 31, 2021 (after a) is done)? (1 Mark)