Question

Hunter's Home Remodeling had cash sales for the month of May totaling $ 49 comma 000. Hunter offers a 1minusyear warranty on its construction services. If Hunter estimates warranty claims will equal 6​% of​ sales, what is the journal entry to record the estimated warranty expense for the​ month?

Answer 1

Answer:

Journal Entry

                                   Dr.            Cr.

Cash                       $49,000

Sales                                           $46,060

Warranty Payable                      $2,940

Explanation:

Cash received against the sales with warranty is recorded into two parts the sales amount and warranty amount.

Total cash receipt = $49,000

Warranty  = Total Sales x Warranty rate

Warranty = $49,000 x 6%

Warranty = $2,940

Sales value = $49,000 - $2,940 = $46,060