Question

In the most recent year of operations, Bertha's Games soldmerchandise costing $104,000 for $194,000. All merchandise was soldunder a 1-year warranty. At the time of sale, Bertha estimated thatwarranty claims would amount to 7% of sales. During the year, shereplaced defective merchandise for $6,000. All transactions werecash transactions.

Prepare journal entries to record all transactions related tothe warranty.

Based solely on the above information, deternine Berthas's Gamesoperating income for the year.