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1. Widget company sells an industrial line of products that are all subject to a 3-year...

1. Widget company sells an industrial line of products that are all subject to a 3-year warranty. Prior experience has resulted in an average warranty cost of 3% of revenue for its products. The company had an accrued warranty liability of $500,000 at December 2018. During January of 2019, product sales were $6 million, and the actual warranty costs incurred were $145,000.

a. Prepare journal entries to record product sales (assume all credit sales), the warranty accrual, and actual warranty costs incurred in January of 2019.

b. Show a T-account with for the transactions in the Estimated Warranty Liability account for January, with the correct ending balance for this liability.

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