1. Argo Computers Inc. restores and resells notebook computers. It originally acquires the notebook computers from corporations upgrading their computer systems, and it backs each notebook it sells with a 90-day warranty against defects. Based on previous experience, Argo Computers Inc. expects warranty costs to be approximately 2% of sales. Sales for the month of December are $500,000. Actual warranty expenditures in January of the following year were $5,000.
a. Record the estimated warranties for the month of December.
b. Record the payment of the actual warranty expenditures of $5,000 in January of the following year.
c. What is the balance in the Warranty Liability account after the entries in a. and b.?
