On August 1, 2019, Pereira Corporation has sold 1,800 Wiglows to Mendez Company at $450 each. Mendez also purchased a 1-year service-type warranty on all the Wiglows for $12 per unit. In 2019, Pereira incurred warranty costs of $9,000. Costs for 2020 were $9,600.

Required: 1. Prepare the journal entries for the preceding transactions.

2. Show how Pereira would report the items on the December 31, 2019, balance sheet.