It is assumed that no components sold during a given month are returned in that month Each component is stamped with a date at time of sale so that the warranty may be properly administered The following table of percentages indicates the likely pattern of sales returns during the 6- month period of the warranty , starting with the month following the sale of components Percentage of total Month following sale returns expected First 30% Second 20 Third 20 Fourth through sixth - 10% each month 30 100% Gross sales of components were as follows for the first six months of 2016 : Month Amount Month Amount January 4,200,000 April 3,250,000 February 4,700,000 May 2,400,000 March 3,900,000 June 1,900,000 The warranty also covers the payment of freight cost on defective components returned and on the new components sent out as replacements The freight cost runs approximately 5% of the sales price of the components returned The manufacturing cost of the components is roughly 70% of sales price , and the salvage value of returned components averages 10 % of their sales price . Returned components on hand on January 1, 2016 , were thus valued in inventory at 10% of their original sales price . Required : 1. Determine the estimated sales returns subsequent to June 30, 2016 2. Determine the required e estimated warranty liability on June 30, 2016 3. Prepare the adjustment of the estimated warranty liability y on June 30 , 2016