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In: Accounting

During 2015, Company sold products for $800.000. Every sale was cash paid. Each product has a...

During 2015, Company sold products for $800.000. Every sale was cash paid. Each product has a 3 year warranty. The management of the Company estimates that the cost of the warranty is 3% of sales.

a) Prepare journal entries for sales during the year and cost of the warranty.

b) On January 1, 2015 the warranty liability account has a balance of 11600. During the year refunds because of the warranty totaled 20.400 of which 4.500 for 2015.
Prepare journal entries for these transactions.

c) What is the balance of the Warranty Liability account at December 31, 2015?

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Expert Solution

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Event Account Debit Credit
a Cash $   800,000
     Sale $   800,000
(To record sale)
Warranty Expense ($800,000*3%) $      24,000
     Warranty Payable $      24,000
(To record warranty provision)
b Warranty Payable $      20,400
     Cash $      20,400
(To record refund)
c Beginning Balance $      11,600
Add: Addition $      24,000
Less: Refund $   (20,400)
Balance, December 31, 2015 $      15,200

ekkarill92 answered 1 year ago
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