Lincoln Repairs and Detailing has recently opened its doors to provide quality auto repair services.

To encourage business, Lincoln offers a 9-month warranty on all repairs. The following data are available for 2019:

Transmissions repaired, 2019.................................... 1,980

Expected frequency of warranty claims ........................0.05 per repair

Actual warranty claims, 2019 ................................. $26,200

Estimated warranty liability, 1/1/19........................... $28,000

Estimated cost of each warranty claim ...........................$ 220

Assume that warranty claims are paid in cash.

Required:

1. Compute the warranty expense for 2019.

2. Prepare the entry to record the payment of the 2019 warranty claims.

3. What is the December 31, 2019, balance in the estimated warranty liability account? Why has the balance in the warranty liability account changed from January 1, 2019?