PROBLEM 3-3

Problem 3-3 (LAA) In 2020, Plumpton Company started selling new computer that carried a 2-year warranty against defects. Based on the manufacturer's recommendations, the entity estimated warranty cost as a percentage of sales. 3% 9% First year of warranty Second year of warranty Sales and actual warranty repairs are as follows: 2020 5,000,000 100,000 2021 7,000,000 250,000 Sales Actual warranty repairs Required: 1. Prepare journal entries to record the transactions for 2020 and 2021. 2. Analyze the estimated warranty liability account on December 31, 2021 to ascertain if the actual repairs approximate the estimate. The sales and repairs occur evenly throughout the year. 3. Prepare the adjustment of the estimated warranty liability on December 31, 2021