Haapi Company sold a copier machine ( that costs $3,500) for $7,000 cash with a warranty to a costumer on August 16 of Yera 1. Haapi expects warranty costs to be 4% of dollar sales. It records warranty expense with an adjusting entry on December 31.

On January 5 of Year 2, the copier requires on- site repairs that are completed the same day. The repair costs $147 for materials taken from the parts inventory. These are the only repairs required in Year 2 for this copier.

REQUIREMENTS:

1) Calculate the warranty expense for Year 1.

2) ) Calculate the warranty liability balance for Year 2 as a December 31.