Merritt Equipment Company sells computers for $$1,500$ each and also gives each customer a $2-$year warranty that requires the company to perform periodic services and to replace defective parts. In $2025,$ the company sold $1,200$ computers. Based on experience, the company has estimated the total $2-$year warranty costs as $$40$ for parts and $$60$ for labor per unit. $($Assume sales all occur at December $31,2025.)$

In $2026,$ Merritt incurred actual warranty costs relative to $2025$ computer sales of $$16,000$ for parts and $$24,000$ for labor.

Instructions

$($a$)$ Record the entries to reflect the above transactions $($accrual method$)$ for $2025$ and $2026.$

$($b$)$ What balance will be reported as a current liability in the $2025$ balance sheet with regard to these transactions?