Question

During august, boxer company sells $361,000 in merchandise that has a one year warranty. experience shows that warranty expenses average about 5% of the selling price. the warranty liability account has a credit balance of $12,300 before adjustment. customers returned merchandise for warranty repairs during the month that used $8,900 in parts for repairs. the entry to record the estimated warranty expense for the month is:

Answer 1

Answer:

Debit Warranty Expense with $18,050; and credit Estimated Warranty Liability with $18,050.

Explanation:

Estimated warranty expenses = Selling price × 5% = $361,000 × 5% = $18,050

Therefore, the entry to record this to debit Warranty Expense with $18,050; and credit Estimated Warranty Liability with $18,050.

This will look in the journal as follows:

Details                                            Dr ($)                  Cr ($)

Warranty Expense                       $18,050

Estimated Warranty Liability                                  18,050

To record the estimated warranty expenses for the month