Pearl Company must make computations and adjusting entries for the following independent situations at December 31, 2018. 1. Its line of amplifiers carries a 3-year warranty against defects. On the basis of past experience the estimated warranty costs related to dollar sales are first year after sale2% of sales revenue; second year after sale3% of sales revenue; and third year after sale5% of sales revenue. Sales and actual warranty expenditures for the first 3 years of business were:

		Sales Revenue			Warranty Expenditures
2016		$ 724,200			$ 5,930
2017		1,047,200			18,690
2018		1,165,500			56,690

Compute the amount that Pearl should report as a liability in its December 31, 2018, balance sheet. Assume that all sales are made evenly throughout each year with warranty expenses also evenly spaced relative to the rates above.

Liability should be reported on December 31, 2018

$

2. With some of its products, Pearl includes coupons that are redeemable in merchandise. The coupons have no expiration date and, in the companys experience, 30% of them are redeemed. The liability for unredeemed coupons at December 31, 2017, was $9,590. During 2018, coupons worth $22,710 were issued, and merchandise worth $8,590 was distributed in exchange for coupons redeemed. Compute the amount of the liability that should appear on the December 31, 2018, balance sheet.

Liability should be reported on December 31, 2018

$