1/4 watt is too small for those resistors.
They have near 7V across them, so you have 7V / 120ohm = 0.058A current in that resistor. That means 0.058A*7V=0.41Watt dissipation. I'd use at least 1 Watt resistor, and not much more than that, since those resistors act as fuses. Under a short at the regulator, or any abnormal current draw, they should blow. Carbon resistors can burn in flames, I've seen that, a small 1/4 watt burning like a match, I'd use a metal film, not too large (metal film resistors can take some more power before burning, so not fast fuses, but they don't catch fire)
1% is not relevant in this application, regular 5% is OK.
I'd use something similar to the original part you see in the unit.