Answer the following question.

During 2012, NASA Co. produced a new line of computers that carry a three-year warranty against manufacturer's defects. Based on industry experience, NASA Co. estimated warranty costs at 1% of sales in the year of sale, 2% in the year after sale, and 3% in the second year after sale.

Sales and actual warranty expenditures for the first three-year of operations were as follows:

Year     Sales          Actual Warranty Expenditures (paid in cash)

2012    $ 300,000     $5,000

2013    750,000          12.000

2014    2.000.000       40.000

Total    $3,050,000     $57,000

Required:

1- Prepare journal entries necessary to record the warranty liability and warranty expenditure in each year.

2- What amount should NASA report as a balance of the Warranty Liability account at December 31, 2014?