Clean all Inc. sells washing machine with a three yearwarranty. In the pastClean all has found that in the year aftersale, warranty cost have been 3% of sales: in the second yearaftersale 5%of sales and in the third year after sale 7%of sales .the following data are also available.
Year Sales Warranty Expenditures
2007 500,000 62,000
2008 650,000 82,000
2009 700,000 85,000
Required
1. Prepare the journal entries for the preceding transactionsfor 2007-2009, using the expense warranty accrual method. closingentries are not required.
2. What amount would clean-All report as a liability on itsDecember 31, 2009 balance sheet, assuming the liability had abalance of 88,200 on December 31,2006?