On 1 July 2015, Baby Goods Pty Ltd had a credit balance of $20,000 in its Warranty Provision account. The warranty expense for the year was $22,000. Baby Goods Pty Ltd estimated that $25,000 was required in the Warranty Provision Account at 30 June 2016.

Required:

1. Prepare journal entries to record the warranty claims during the period.
2. Prepare the end-of-period adjustments to the Warranty Provision account. Assume that all warranty costs were for the replacement of parts from spare parts inventory.
3. Briefly discuss the purpose of the Warranty Provision account.
4. Based on your calculations in (i), comment on the adequacy of the Warranty Provision account at the 30 June 2016.