Franklin Company sells computers for $1,800 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2019, the company sold 2,000 computers.

Based on past experience, the company has estimated the total 2-year warranty costs as $72 for parts and $96 for labor per unit.

(Assume sales all occur at December 31, 2019.)

In 2020, Franklin incurred actual warranty costs relative to 2019 computer sales of $80,000 for parts and $90,000 for labor.

Instructions

(a) Prepare the entries to reflect the above transactions for 2019 and 2020.

(b) The transactions of part (a) create what balance under current liabilities in the 2020 balance sheet?