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To support herself while attending school, Daun Deloch sold stereo systems to other students. During the rst 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 Prepare an income statement and statement of cash flows for Daun's rst year of operation. (Statement of Cash Flows only, items to be deducted must be indicated with a negative amount.) 9 Answer is complete but not entirely correct. $ 370,000 0 260.000 0 110,000 4,020 6 Net income 105,980 Sales revenue Cost of goods sold Gross margin Equipment DAUN'S STEREOS Statement of Cash Flows Cash flow from operating activities Inflow from customers $ 110 000 Outflow for loan 4.020 nflow from sales tax 2. 200 Outflow for warranty expense 3000 Net cash flow from operating activities $ 1 19 . 220 Cash flows from investing activities Cash flows from financing activities Net change in cash $ 119. 220 Plus : Beginning cash balance Ending cash balance $ 119. 220 What is Daun's total warranties liability at the end of the accounting period ? Total warranties liability