Response to the following problem:
Zebra Corp. commenced operations on January 1, 2016. It estimates warranty expense as 1% of yearly sales. During June 2016 it satisfied warranty claims as follows:
Parts from inventory $2,000
Salaries paid in cash 500.
The 2016 warranty claims amounted to $22,000 (including the entry above) and 2016 sales revenue was $2 million.
Required:
1. Record the June warranty claims of $2,500.
2. Record the 2016 warranty expense.
3. Calculate the balance in the estimated warranty liability account at December 31, 2016. Comment on your calculations.
Descriptions and general ledger account numbers are not necessary. Show calculations where applicable.