On September 1, 2016, Carolina Electronics Company has 1,000 Blu-ray players ready for sale. October 1, 2016, 870 are sold, on account, at \$125 each with a 1-year assurance-type warranty. Carolina estimates that the warranty cost on each Blu-ray player sold will probably average $8 per unit. During the final 3 months of 2016, Carolina incurred warranty costs of $3,800, and in 2017 warranty costs were $3,160. Required: 1. Prepare the journal entries for the preceding transactions. 2. Show how the preceding items would be reported on the December 31,2016 , balance sheet. 3. Prepare the journal entries for the preceding transactions using the modified cash basis method. 4. Next Level Which method produces the better measure of income? Why? Chart of Accounts 1. the saie of Bilu-ray players on account on October 1,2016 2. the related warranty accoval on October 1.2016 3. the warranty costs paid during the last quarter of 2016 4. the warranty costs pald during the 2017 Instructions Chart of Accounts Ceneral Journal Balance Sheet Next Level Additional Instructions Carolina Electronics Company Partial Balance Sheet December 31, 2016 1 Current Liabilities: 2 Select the item below that is true in response to the better measure of income and the reason why. Under the accrual method, a company's liabilities will be misstated. In addition, the accrual method misstates warranty expense, and income, because the actual warranty repair occurs in a period other than the period in which the sale occurs. The direct expense method provides the better measure of income because it expenses warranty costs when incurred. The modified cash basis method provides the better measure of income because it properly matches warranty costs to the revenues that the warranties helped generate. This method also creates a contingent liability representing a company's expected use of resources. The accrual method provides the better measure of income because it properly matches warranty costs to the revenues that the warranties helped generate. This method also creates a contingent liability representing a company's expected use of resources