Dell Computers is a leader in the computer industry with over $59 billion in sales each year. A recent annual report for Dell contained the following note

Warranty

We record warranty liabilities at the time of sale for the estimated costs that may be incurred under our limited warranty. Factors that affect our warranty liability include the number of installed units currently under warranty, historical and anticipated rates of warranty claims on those units, and cost per claim to satisfy our warranty obligation.

Required:

Assume that estimated warranty costs for the current year are $500 million and that $400 million of warranty work was performed during the year. Provide the journal entries required to recognize warranty expense and the warranty services provided during the year. Assume that all warranty services were paid for with cash.

a)

b)