Shefford Cutlery extends a lifetime replacement warranty on all units sold. Using past experience, the company estimates that .75% of units sold will be returned and require replacement at an average cost of $101 per unit. On January 1, 2020, the balance in Sheffords Estimated Warranty Liability account was $17,000. During 2020, sales totalled $3,740,000 or 12,400 units. The actual number of units returned/replaced was 94.

A. Prepare the entry to estimate warranty liabilities based on the units sold in 2020. Assume the adjustment is made on December 31, 2020.

B. Record the replacement of the units returned in 2020 (use date of December 31, 2020).

C. Calculate the balance in the Estimated Warranty Liability account at December 31, 2020.

D. What is the warranty expense that will appear on the income statement for the year ended December 31, 2020?