VNN Inc. sells 20,000 units of it's specialty XYZ product in June 20XX. They provide a one-year warranty to their customers.

Their experience is that 2% of the units will be returned for repairs. The cost to repair is $25 a unit, all inventory of the company.

Answer parts A, B, and C below:

A. Prepare the entry to record the warranty liability at June 20XX.

B. Assume that the company's prediction of returned units comes true in the following April 20XY. Prepare the appropriate journal entry.

C. What is the effect of the April 20XY warranty claim on net income in 20XY?