In 2018, Cap City Inc. introduced a new line of televisions that carry a two-year warranty against manufacturer's defects. Based on past experience with similar products, warranty costs are expected to be approximately 2% of sales during the first year of the warranty and approximately an additional 3% of sales during the second year of the warranty. Sales were $5,000,000 for the first year of the product's life and actual warranty expenditures were $19,000. Assume that all sales are on credit. Required: 1. Prepare journal entries to summarize the sales and any aspects of the warranty for 2018. 2. What amount should Cap City report as a liability at December 31, 2018? 1. Record the entry for sales.

Record the entry for Accrued liability and expense.

Record the entry for Actual expenditures paid.

2.

Estimated liability =

Actual expenditures paid =

Balance December 31st =