On January 1, 2021, TEX Ltd. made a cash sale to PIT Ltd. for several products at a total price of $500,000. The cost of the products sold was $300,000. Included with the sale was an assurance-type warranty covering two years (the rest of 2021 and all of 2022). In addition, along with the products, TEX Ltd. also sold PIT Ltd. an extended service-type warranty for $25,000 which would cover the years 2023 and 2024. TEX Ltd. estimated future costs of $10,000 relating to honouring any claims on the assurance-type warranty. PIT Ltd. did not make any warranty claims regarding this sale in 2021. However, in 2022, warranty claims were made by PIT Ltd. which cost TEX Ltd. $9,500 to honour.

1.) Prepare the necessary journal entries to record the sale and cost of goods sold transactions on January 1, 2021. 2.) Prepare the necessary journal entry to record the warranty costs incurred in 2022. 3.) How much warranty revenue is earned in 2022?