P$12\mathrm{.}5$B $($LO $3)($Warranties$,$ Accrual, and Cash Basis$)$ Houston Air Corporation sells central home

air conditioning units with a $2-$year warranty contract that requires the corporation to replace defective

parts and to provide the necessary repair labor. During $2025,$ the corporation sells for cash $1,100$ air

conditioning units at a unit price of $$4,000.$ On the basis of past experience, the $2-$year warranty costs are

estimated to be $$125$ for parts and $$220$ for labor per unit. $($For simplicity, assume that all sales occurred

on December $31,2025.)$ The warranty is not sold separately from the air conditioning units.

Instructions

a$.$ Record any necessary journal entries in $2025.$

b$.$ What liability relative to these transactions would appear on the December $31,2025,$ balance sheet

and how would it be classified?

c$.$ In $2026,$ the actual warranty costs to Houston Air Corporation were $$71,950$ for parts and $$126,900$

for labor. Record any necessary journal entries in $2026.$