The accounting records of Thompson Carpets showed a balance of $2,000 in Estimated Warranty Payable at December 31, 2015. In the past, Thompson Carpets' warranty expense has been 3 percent of sales. During 2016, Thompson Carpets made sales of $298,000 on account and paid $7,000 to satisfy warranty claims.

Requirements

1. Journalize Thompson Carpets, warranty expense, and cash payments made to satisfy warranty claims during 2016. Explanations are not required. Ignore cost of goods sold.

2. What balance of Estimated Warranty Payable will Thompson Carpets report on its balance sheet at December 31, 2016? What amount of warranty expense will Thompson Carpets report on its income statement for the year ended December 31, 2016?