In 2019, BMJ Plumbing Company sold 250 water heaters for $1,050 each. The water heaters carry a 5-year warranty for repairs. BMJ Plumbing estimates that repair costs will average 2% of the total selling price.
Required:
1. How much is recorded in the warranty liability account as a result of selling the water heaters during 2019, assuming no warranty service has yet been performed?
2. Prepare the necessary adjusting entry at December 31, 2019.