Metlock, Inc. sells products that carry a two year warranty. Anydefective product is replaced with a new item taken from inventory.Management believes that this is the most cost effective way todeal with any defects or customer complaints. Estimates of claimsare expected to be 2 out of every 100 units sold. The units sellfor $32 and cost $22. All sales are on account, and the 13% HST isnot included in the selling price.

Also, in the last year, Metlock began selling gift cards indenominations of $59 and $29. Cash and/or credit cards wereaccepted for payment. This practice was started when Metlock’s CFOlearned that not all of the gift cards are actually redeemed. HSTis recorded at the time of redemption.

Metlock has a calendar year end and uses a perpetual inventorysystem.

Transactions for the current fiscal year include thefollowing:

1.		Sales of 4,080 units.
2.		Return of 264 units not defective, returned to inventory.
3.		Replaced 42 units under warranty.
4.		Sold $49,540 of gift cards.
		Redeemed $14,730 of gift cards; COGS was $8,880. (Hint: Theredeemed gift cards were used to pay for merchandise as well as theHST.) Prepare journal entries for the above transactions. (To record sales and sales tax payable) (To record cost of goods sold) (To record sales returns and sales taxes) (To record cost of goods sold) (To record honouring of actual warranty cost) (To record sale of gift cards) (To record redemption of gift cards) (To record cost of goods sold) Prepare any adjusting journal entries required on December 31,the end of the fiscal year. (Hint: Assume 9% of the gift cards willnever be redeemed.) (To accrue warranty costs) (To record redemption) Prepare the journal entry to record payment of the HST. Account Titles and Explanation Debit Credit What is the ending balance in the Warranty Liability account onDecember 31 (after adjustments)? Ending balance in the Warranty Liability of $