Question

Listed below are a few transactions and events of Maxum Company. Employees earn vacation pay at a rate of one day per month. Maxum estimated and must expense $5,200 of accrued vacation benefits for the year. During December, Maxum Company sold 3,800 units of a product that carries a 60-day warranty. December sales for this product total $121,000. The company expects 6% of the units to need warranty repairs, and it estimates the average repair cost per unit will be $12. Prepare adjusting entries at December 31 for Maxum Company’s year-end financial statements for each of the above separate transactions.

Answer 1

Answer: Please refer to Explanation

Step-by-step explanation:

You forgot to say that 23 Employees qualified for one vacation day each and that the average daily wage is $160.

The following is how you account for the above

December

DR Vacation Benefit Expense ( 23 * 160 ) $3,680

CR Vacation Benefits Payable $3,680

(To record payment of vacation benefit)

For the second Instance with the December Sales,

DR Warranty Expense Account ( 3,800 * 6% * 12) $2,736

DR Estimate Warranty Liability $2,736

(To record estimated Warranty Liability).

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