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Chapter 11: 4TI (page 578)

: O’Conner guarantees its vacuums for four years. Prior experience indicates that warranty costs will be approximately 6% of sales. Assume that O’Conner made sales totaling $200,000 during 2018. Record the warranty expense for the year.

Short Answer

Expert verified

The warranty expenses payable will be credited with $12,000

Step by step solution

01

warranty Expense

6% warrenty expence =rate×Sales= 6100× $200,000=$12,000

02

Journal Entries

Date

Particulars

Debit

Credit

Year 2018

Warranty Expense (6% 0f $200000)

$12,000

Estimated warranty payable

$12,000

To accrue warranty payable.

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Most popular questions from this chapter

When do businesses record warranty expenses, and why?

Runner guarantees its snowmobiles for three years. Company experience indicates that warranty costs will be approximately 5% of sales. Assume that the Trail Runner dealer in Colorado Springs made sales totaling \(600,000 during 2018. The company received cash for 20% of the sales and notes receivable forthe remainder. Warranty payments totaled \)10,000 during 2018.

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