A company sells its product subject to a warranty that covers the cost of parts

Question

A company sells its product subject to a warranty that covers the cost of parts for repairs during the six months after the date of sale. Warranty costs are estimated to be 5% of sales. During the month of July, the company preformed warranty work and used $11,000 of parts to preform the warranty work. Sales for July were $450,000
1. Record the warranty expense for the month of July.
2. Record the costs of the warranty completed in July.
3. If the estimated warranty liability account had a credit balance of $10,000 on June 30, what is the account balance at July 30? A company sells its product subject to a warranty that covers the cost of parts for repairs during the six months after the date of sale. Warranty costs are estimated to be 5% of sales. During the month of July, the company preformed warranty work and used $11,000 of parts to preform the warranty work. Sales for July were $450,000
1. Record the warranty expense for the month of July.
2. Record the costs of the warranty completed in July.
3. If the estimated warranty liability account had a credit balance of $10,000 on June 30, what is the account balance at July 30?
1. Record the warranty expense for the month of July.
2. Record the costs of the warranty completed in July.
3. If the estimated warranty liability account had a credit balance of $10,000 on June 30, what is the account balance at July 30?

Explanation / Answer

1 Warranty expense 22500 (450000*5%)                  Estimated Warranty liability 22500 2 Estimated Warranty liability 11000                  Cash 11000 3 Estimated Warranty liability Beginning 10000 Add Warranty Expense 22500 32500 Less liability used 11000 Ending 21500

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