1. Perez Corp began operations on 1/01/18 and has a fiscal year end of 12/31. Perez rebuilds transmissions and provides a 12 month warranty on all its work. Perez estimates that warranty performance cost will be approximately 2.5% of revenue. During 2018, Perez rebuilds transmissions and charges customers a total of $500,000. Also during 2018, Perez performed warranty work, incurring costs totaling $6,400 to complete the warranty work. Based on the information above:

A. What the amount of warranty expense should appear on Perezs 12/31/18 income statement,

B. Determine the amount of estimated warranty liability to appear in the 12/31/18 balance sheet.