On August 1, 2016 Pereira Corporation has sold 1,600 Wiglows to Mendez Companyat $450 each. Mendez also purchased a 1-year service-type warranty on all the Wiglows for $12 per unit. In 2016, Pereira incurred warranty costs of $9,200. Costs for 2017 were $7,000.

Required:

1. Prepare the journal entries for the preceding transactions

2. Show how Pereira would report the items on the December 31,2016, balance sheet