Question

​Buffalo, Inc. reported sales revenue for 2017 of $906,000. The products were sold with a​ nine-month warranty. Members of​ Buffalos management estimate that the cost of the warranty will be equal to 12​% of sales revenue. Which of the following will be included in the entry to record the actual amounts paid out as a result of warranty​ claims?

Answer 1

Step-by-step explanation:

The journal entry is shown below:

Estimated Warranty Payable Dr A/c

To Cash A/c

(Being the actual amount paid is recorded)

We simply debited the estimated warranty payable account and credit the cash account as the amount is paid so we credited the cash account

And for estimates, another entry is recorded which is shown below:

Warranty Expense A/c Dr

To Estimated warranty payable A/c

(Being estimated amount is recorded)