You have been asked by a client to review the records of Pina Company, a small manufacturer of precision tools and machines. Your client is interested in buying the business, and arrangements have been made for you to review the accounting records. Your examination reveals the following information.

4. All machines are sold subject to a 5-year warranty. It is estimated that the expense ultimately to be incurred in connection with the warranty will amount to ¹₂ of 1% of sales. The company has charged an expense account for warranty costs incurred. Sales per books and warranty costs were as follows.

				Warranty Expense for Sales Made in
Year Ended March 31		Sales		2016		2017		2018		Total
2016		$977,600		$790						$790
2017		1,050,400		374		$1,362				1,736
2018		1,866,800		333		1,685		$1,986		4,004

Can you explain how to compute the figures in the sections outlined in red? Thanks.

Pina Company Limited Schedule of revised net income Computations Summary 2016 -2017-120181 2016 2017 2018