Question

During August, Boxer Company sells $358,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance of $12,600 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,200 in parts for repairs. The entry to record the estimated warranty expense for the month is:

Answer 1

The entry to record is Debit Warranty Expense $17,900 and credit Estimated Warranty Liability $17,900

Debit Credit

Warranty expense $17,900

Warranty payable $17,900

Step-by-step explanation:

In order to prepare the entry to record, first we would have to calculate how much would be the warranty expense for the month, this would be calculated as follows according to the given data:

warranty expense=$358,000×5%=$17,900

Therefore, the entry to record is the following:

Debit Warranty Expense $17,900 and credit Estimated Warranty Liability $17,900

Debit Credit

Warranty expense $17,900

Warranty payable $17,900