Sage Hill Inc.sells products that carry a two-year warranty. Any defective product is replaced with a new item taken from inventory. Management believes that this is the most cost-effective way to deal with any defects or customer complaints. Estimates of claims are expected to be3out of every 100 units sold. The units sell for $25and cost $15. All sales are on account, and the13% HST is not included in the selling price.

Sage Hillhas a calendar year end and uses a perpetual inventory system.

Record journal entries for the following transactions:

1.Sales on account for5,000units + HST

2.Year-end accrual for warranty expense

3.Replacement of46units under warranty

Account Titles and Explanation Debit Credit