Question

Stable Enterprises had sales of $230,000 in Year 1. Stable warrants its products and estimates warranty expense to be 4% of sales. In Year 2 Stable paid $9,000 cash to settle warranty obligations. Which of the following journal entries would be required to recognize the settlement of the warranty obligations?

Answer 1

Warranty payable=Debit=9000

Cash=Credit=9000

Step-by-step explanation:

Given

Sales= $230,000 in one year

Warranty expense= 4% of sales

Cash paid to settle warranty obligations= $9,000

The journal entries required to recognize the settlement of the warranty obligations=?

Warranty payable=Debit=9000

Cash=Credit=9000

Warranty is a written statement or promise given by the manufacturer or seller of a product to the customer to repair or replace the product in case of any fault or damage within specific period of time.