On August 1, 2013, Pereira Corporation has sold 1,600 Wiglows to Mendez Company at $450 each. Mendez also purchased a 1-year warranty on all the Wiglows for $12 per unit. In 2013, Pereira incurred warranty costs of $9,200. Costs for 2014 were $7,000.

Required:

1. Prepare the journal entries for the preceding transactions using the sales warranty accrual method.

2. Show how Pereira would report the items on the December 31, 2013, balance sheet.