In 2020, Hydrogen corp. began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated the warranty cost related to dollars sales are as follows First year of warranty 2% Second year of warranty 5% Sales and actual warranty expenditures for 2020 and 2021 are presented below: 2020 0021 Sales s 450,000 s 600,000 Actual warranty expenditures 15,000 30,000

Required: Hydrogen uses the expense approach to account for warranties. What is the estimated warranty liability at the end of 2021 ?

Part 2: On January 1, 2020, Queen Ltd. sold equipment to King Company. There was no established exchange price for the property and King gave Queen a zero-interest bearing note. The note is to be repaid on December 31, 2022. The market rate of market rate of interest for a loan of this type is 10%. King reports using the effective interest method. King also paid $l ,200 for delivery and installation separately to a freight company required;

a. At what value should King record the equipment?

b. At what value would the note be reported in the books of King at December 31, 2020.

c. what interest expense would King report for the 2021 year?