E10-12 The accounting records of Clay Ceramics included the following at January 1, 2012:

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E10-12 Accounting for warranty expense and warranty payable [5–15 min]
The accounting records of Clay Ceramics included the following at January 1, 2012:

Estimated warranty payable
Beginning balance 4,000

In the past, Clay’s warranty expense has been 8% of sales. During 2012, Clay made
sales of $136,000 and paid $7,000 to satisfy warranty claims.

Requirements
1. Journalize Clay’s warranty expense and warranty payments during 2012. Explanations are not required.

2. What balance of Estimated warranty payable will Clay report on its balance sheet at December 31, 2012?