Question

A company estimates that warranty expense will be 4% of sales. The company's sales for the current period are $185,000. The current period's entry to record the warranty expense is:

Answer 1

Answer:

Dr Warranty Expense 7,400

Cr Estimated Warranty Liability 7,400

Explanation:

Based on the information given we were told that the company estimated that the warranty expense will be 4% of sales in which the sales for the current period was the amount of $185,000. Therefore the current period's Journal entry to record the warranty expense is:

Dr Warranty Expense 7,400

Cr Estimated Warranty Liability 7,400

(185,000 x 0.04 = 7,400)

Answer 2

The journal entry for recording the warranty expense is

Dr Warranty Expense 7,400

    Cr Estimated Warranty Liability 7,400

Journal entry:

Dr Warranty Expense 7,400 (185,000 x 0.04)

    Cr Estimated Warranty Liability 7,400

(being warranty expense is recorded)

here expense is debited as it increased the expense and liability should be credited as it also increased the liability.

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