Question

During August, Boxer Company sells $363,000 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 $12,100 before adjustment. Customers returned merchandise for warranty repairs during the month that used $8,700 in parts for repairs. The entry to record the estimated warranty expense for the month is:

Answer 1

Warranty Expense A/c ($363,000 × 4%) $14,520

To Estimated Warranty Liability A/c $14,520

(Being the warranty expense is recorded)

Step-by-step explanation:

The journal entry to record the estimated warranty expense is shown below:

Warranty Expense A/c ($363,000 × 4%) $14,520

To Estimated Warranty Liability A/c $14,520

(Being the warranty expense is recorded)

Here we debited the warranty expense as it is an expense and it increased the expense also it contains normal debit balance likewise the liability is credited as it increased the liability