Question

during august, boxer company sells $366,000 in merchandise that has a one-year warranty. experience shows that warranty expenses average about 4% of the selling price. the warranty liability account has a credit balance of $13,800 before adjustment. customers returned merchandise for warranty repairs during the month that used $10,400 in parts for repairs. the entry to record the customer warranty repairs is:

Answer 1

The entry to record the customer warranty repairs is: Debit Warranty Expense $14,640, Credit Warranty Liability $14,640.

Step-by-step explanation:

The entry to record the customer warranty repairs is:

1. Debit Warranty Expense $14,640
2. Credit Warranty Liability $14,640

The warranty liability account has a credit balance of $13,800 before adjustment, and customers returned merchandise for warranty repairs during the month that used $10,400 in parts for repairs. Therefore, the adjustment to record the customer warranty repairs would increase the warranty liability by $14,640 ($13,800 + $10,400 * 0.04). This is because warranty expenses average about 4% of the selling price.