Beck Company sells a product for $3,200. When the customer buys it, Beck provides a one-year warranty. Beck sold 120 products during 2012. Based on analysis of past warranty records, Beck estimates that repairs will average 4% of total sales.

Required

1. Identify and analyze the effect of recording the estimated liability.

2. Assume that during 2012, products under warranty must be repaired using repair parts from inventory costing $10,200. Identify and analyze the effect of the repair of the products.

3. Assume that the balance of the Estimated Liability for Warranties account as of the beginning of 2012 was $1,100. Calculate the balance of the account as of the end of 2012.