Recording and Reporting Warranties During 2020, Ward Company introduced a new product carrying a three-year warranty against defects, which has a separate purchase price. The company collected $16,000, and $28,000 for this extended warranty feature in the years 2020 and 2021, respectively. The company uses straight-line recognition of warranty revenue. The estimated warranty costs are 2% of sales within the first 12 months following the sale and 4% in the second 12 months following the sale. For simplification, assume that sales occurred at the first of the year. Sales and actual warranty expenditures for the years ended December 31, 2020, and 2021 are: Actual Warranty Sales 2020 $480.000 800,000 $1,280,000 2021 Expenditures $7,200 24,000 $31,200 a. Record the journal entries required for (1) the sale of the products and warranties on credit, (2) incurred warranty costs, and (3) recognition of warranty revenue for 2020 and 2021. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round your answers to the nearest whole dollar. a. Date Account Name 1. 2020 Accounts Receivable Deferred Warranty Revenue Sales Revenue = To record sale of products and warranties Dr. Cr. 496,000 0 0 16,000 0 480,000 2 2020 Warranty Expense Cash and Payables To record incurred warranty costs 3. 2020 Deferred Warranty Revenue Warranty Revenue 0 0 0 0 0 To recognize warranty revenue 1. 2021 Accounts Receivable Deferred Warranty Revenue Sales Revenue = To record sale of products and warranties 2. 2021 Warranty Expense Cash and Payables To record incurred warranty costs 3. 2021 Deferred Warranty Revenue Warranty Revenue 0 0 0 844.000 0 0 44,000 800,000 0 0 0 0 0 0 0 0 0 0 To recognize warranty revenue b. What liability would be reported on the balance sheet at the end of 2020 and 2021? Balance Sheet, Dec. 31 2020 2021 b. Current liabilities Deferred Warranty Revenue S 05