In 2018, Simon Corporation began selling a new line of toasters that carry a three-year warranty against defects. Based upon past experiences with similar products, the estimated warranty costs related to dollar sales are as follows:

First year after sale 2%

Second year after sale 4%

Third year after sale 6%

Sales and actual warranty expenditures for 2018, 2019 and 2020 are presented below:

Year	Sales	Warranty Expenditures (costs incurred)
2018	$1,155,000	$ 31,750
2019	$1,650,000	$ 83,500
2020	$1,750,000	$ 150,500

Instructions:

1. Prepare the journal entries to record the above transactions for the third fiscal year only (the one ending December 31, 2020), including:

1. the initial journal entry to record the sales. Assume all sales are on account.
2. The Warranty Expenditures for the year, and
3. The year end adjustment to record the warranty expense.

Assume the company uses the expense warranty approach for recording estimated warranty liabilities (like the assignment you handed it). Dont forget the narratives! And Show Calculations.

2. Calculate the amount that Simon should report as warranty expense on its 2020 income statement.

3. What will be the balance in the Estimated Warranty Liability account as at December 31^st 2020? Consider using a T account to prove your answer (not mandatory).