Merritt Equipment Company sells computers for $1,640each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2017, the company sold910computers. Based on past experience, the company has estimated the total 2-year warranty costs as $40for parts and $60for labor. (Assume sales all occur at December 31, 2017.)

In 2018, Merritt incurred actual warranty costs relative to 2017 computer sales of $12,400for parts and $18,600for labor.

part 1

Under the expense warranty approach, give the entries to reflect the above transactions (accrual method) for 2017 and 2018.

Date Account Titles and Explanation Debit Credit

2017

2017

2018

part 2

The transactions of part (a) create what balance under current liabilities in the 2017 balance sheet?

Current Liabilities