Clean-All, Inc., sells washing machines with a three-year warranty. In the past Clean-All has found that in the year after sale, warranty costs have been 3% of sales; in the second year after sale, 5% of sales; and in the third year after sale, 7% of sales. The following data are also available:
1. Prepare the journal entries for the preceding transactions for 2007â€“2009, using the expense warranty accrual method. Closing entries are not required.
2. What amount would Clean-All report as a liability on its December 31, 2009 balance sheet, assuming the liability had a balance of $88,200 on December 31,2006?