Star Lake Auto Repairs specializes in the repair of foreign car transmissions. To encourage business, Star Lake offers a six-month warranty on all repairs. The following data is available for 2022.

Number of transmissions repaired in 2022 6,500

Expected probability of warranty claims per repair 10%

Actual warranty claims in 2022 $ 120,000

Estimated warranty liability, January 1, 2022. $ 30,000

Estimated cost of each warranty claim $ 250

Required:

Calculate the estimated warranty expense for 2022. (2 marks)

Prepare the journal entry in proper format including explanation, to record the estimated 2022 warranty expense. (2.5 marks)

Date	Account	Debit	Credit
12/ 31/ 2022

Prepare the journal entry in proper format including explanation, to record payment of the 2022 warranty claims. (2.5 marks)

Date	Account	Debit	Credit
12/ 31/ 2022

Calculate the balance of the December 31, 2022, estimated warranty liability account. (1 mark)

Explain why the balance of the account has increased or decreased from January 1, 2022? (2 marks)