El1.5 (LO 2) Betancourt Company sells automatic can openers under a 75-day warranty for defective merchandise. Based on past experience, Betancourt estimates that 3% of the units sold will become defective during the warranty period. Management estimates that the average cost of replacing or repairing a defective unit is $15. The units sold and units defective that occurred during the last 2 months of 2020 expense are as follows.

Month Units sold units defective prior to Dec. 31

November 30,000 600

December 32,000 400

Instructions a. Prepare the journal entry to record the costs incurred in honoring 1,000 warranty claims. (Assume actual costs of $5,000.)

b. Prepare the journal entry to record the warranty liability at December 31 for the units sold in November and December. Give the entry to record the honoring of 500 warranty contracts in January at an average cost of $15