Western Refrigeration borrowed $230,000 to purchase inventory on September 15, 2020 for 45 days at 6% interest by signing a note.

On December 6, 2020, Western Refrigeration sold an industrial fridge for cash of $12,000 (cost $9,400) with a two-year parts and labour warranty. Based on prior experience, Western expects eventually to incur warranty costs equal to 5% of the selling price. The fiscal year coincides with the calendar year. On January 20, 2021, the customer required a service call for the fridge for repairs that were completed the same day. The cost of the repairs consisted of $198 for the materials taken from the parts inventory and $360 of labour. These were the only repairs required in 2021 for this fridge.

Required

1. On what date will the note mature?

2. How much interest expense is created by this note?

3. How much warranty expense should the company report in 2020 for this fridge?

4. How much is the warranty liability for this fridge as of December 31, 2020?

5. How much warranty expense should the company report in 2021 for this fridge?

6. How much is the warranty liability for this fridge as of December 31, 2021?

7. Show the journal entries that would be made to record

(a) For the note on September 15, 2020;

(b) The payment of the note;

(c) The sale (assume a perpetual inventory system);

(d) The adjustment on December 31, 2020, to record the warranty expense;

(e) The repairs that occurred in January 2021.

Ignore sales taxes.