Question

Lana Appliances sells dishwashers with a fourminusyear warranty. In​ 2018, sales revenue for dishwashers is $ 87 comma 000. The company estimates warranty expense at 4.5​% of revenues. What is the 2018 warranty​ expense?

Answer 1

The total 2018 warranty expense is $3,915

Step-by-step explanation:

To solve, we simply multiply total sales revenue and the estimated warranty expense percentage:

$87,000 x 4,5% = $3,915

We can also make the following entries in the journal

Debit Credit

Warranty Expense $5,000

Warranty Liability $5,000