Refer to the information in BE8–11. Determine the financial statement effects of accounting for expected future warranty costs.

Data from in BE8-11

Sony introduces a new compact music player that carries a two-year warranty against manufacturer’s defects. Based on industry experience with similar product introductions, warranty costs are expected to be approximately 3% of sales. By the end of the first year of selling the product, total sales are $31 million, and actual warranty expenditures are $300,000. Record the adjusting entry for the remaining expected future warranty costs as of December 31, the end of the reporting period.