E11-21 Accounting for warranty expense and warranty payable Learning Objective 3

Question

E11-21 Accounting for warranty expense and warranty payable Learning Objective 3 The accounting records of Sculpted Ceramics included the following at January 1 2018: 1. Warranty Expense $10,170 Estimated Warranty Payable 5,000 Beg. Bal. In the past, Sculpted's warranty expense has been 9% of sales. During 2018, Sculpted made sales of $113,000 and paid $7,000 to satisfy warranty claims Requirements 1. Journalize Sculpted's warranty expense and warranty payments during 2018 Explanations are not required 2. What balance of Estimated Warranty Payable will Sculpted report on its balance heet at December 31, 2018?

Explanation / Answer

Answer:

Expected Warranty Expense: $ 113000*.09 = $10170

So Entry

1.Warranty Epense

A. Warranty Expense A/c Dr 10170

To Estimated Warranty Payable A/c 10170

(Being Expense Recognised)

B. Profit and Loss A/c Dr. 10170

To Warranty Expense 10170

(Being Expense charged)

C. Estimated Warranty Payable Dr $7000

To Bank A/c $7000

(Being Amount Paid)

2. Balance on 31 december in Estimated Warranty Payable A/c :

Opening+New recorded-Paid

=5000+10170-7000= $8170

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