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:

Required
1. Prepare the journal entries for the preceding transactions for 2007–2009, 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?

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Expenditures Year 2007 2008 2009 Sales $500,000 650,000 700,000 Warranty $62,000 82,000 85,000