Exercise $9-6$A $($Algo$)$ Effect of warranties on income and cash flow LO $9-4$

To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Daun purchased the stereo systems for $$260,000$ and sold them for $$370,000$ cash. She provided her customers with a one$-$year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to $2$ percent of sales. During the year, she paid $$4,020$ cash to replace a defective tuner.

Required

a$.$ Prepare an income statement and statement of cash flows for Daun$$s first year of operation.

b$.$ Based on the information given, what is Daun$$s total warranties liability at the end of the accounting period?