3. Bard Company began selling a new computer that carried a 1-year warranty against defects. Based on the manufacturer’s recommendations, Bard projects warranty costs at 3% of dollar sales. Sales for 2006 were $625,000.

a. Calculate the estimated warranty expense for 2006.

b. Record the entry to reflect the warranty expense for 2006.

c. Actual warranty expense for the first year of selling the new computer was $16,450. Record the entry to reflect the actual warranty expense for 2007.

d. What is the ending balance in the warranty liability account at the end of 2007?

a. Use the sales times the percentage given.
b. Dr. Warranty expense Cr. Warranty reserve 18750
c. Dr. warranty reserve Cr. Cash 16450
d. 18750-16450