SST Jetski Corp. has sold motorized watercraft for a number of years. SST includes a three-year warranty

on each watercraft they sell. Management estimates that the cost of providing the warranty coverage

is 1% of sales in the first year and 2% of sales in each of years two and three. Other facts follow:

SST reported a $260,000 provision for warranty payable on its balance sheet at

December 31, 2020.

SSTs sales for 2021 totalled $4,800,000 spread evenly throughout the year.

The cost to SST of meeting their warranty claims in 2021 was $240,000: $150,000 for parts

and $90,000 for labour.

SSTs sales for 2022 totalled $5,400,000 spread evenly throughout the year.

The cost to SST of meeting their warranty claims in 2022 was $300,000: $180,000 for parts

and $120,000 for labour. Based on recent claims history, SST revises their 2022 warranty

provision to 7% of sales.

Required:

a. Prepare summary journal entries to record warranty expense and warranty claims in 2021

and 2022.

b. Determine the provision for warranty payable that SST will report as a liability on December

31, 2022.