Question

​Hunter's Home Remodeling had cash sales for the month of May totaling​ $43,700. Hunter offers a 1−year 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

warranty expense 2,622 debit

warrant liability 2,622 credit

Step-by-step explanation:

it will declare a warranty liability equal to the expected cost of the warrant. This is done to match the expenses with the time they occur.

Because, the warrants will be claimed in the subsequent years or the sales made this period.

warrant liability/expense: 43,700 x 6% = 2,622