Question 5: (12 marks) Tavares Flyer Co. sells remote control airplane engines, which carry a one-year warranty. If a customer brings in a defective engine, he replaces the engine with a new one from his inventory. Tavares estimates that 3% of units sold will be defective. As at January 1, the Warranty Liability had a credit balance of $660. Wildhorse provided the following information for his year end of December 31. Cost per engine $125 Total sales 1,280 units Actual

Required:

1. Calculate the estimated warranty expense for the year.
2. Prepare the journal entry for the estimated warranty expense for the year.
3. Prepare the journal entry to record the actual warranty costs for the year.
4. Calculate the balance in the warranty liability account at the end of the year.