To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Daun purchased the stereo systems for $340,000 and sold them for $450,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 3 percent of sales. During the year, she paid $4,820 cash to replace a defective tuner. Required a: Prepare an income statement and statement of cash flows for Dauns first year of operation.

b: What is Dauns total warranties liability at the end of the accounting period?