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A company restores and resells notebook computers. It originally acquires the notebook computers from corporations upgrading their computer systems, and it backs each notebook it sells with a 90-day warranty against defects. Based on previous experience, the company expects warranty costs to be approximately 5% of sales. Sales for the month of December are $450,000. Actual warranty expenditures in January of the following year were $15,500.

2. & 3. Record the necessary entries in the Journal Entry Worksheet below.