At the beginning of Year 2, McKee, Inc. had a balance in the Warranties Payable account of $15,600. During the year McKee sold for $650,000 several products that carried a two-year warranty. McKee estimated that warranty expense would be 3% of sales for the year.Required:a) Prepare McKee's year-end adjusting journal entry for warranty expense.b) If McKee's incurred actual warranty cost is $12,500 during Year 1, what is the balance in the Warranties Payable account after the adjusting entry is made?
What will be an ideal response?
| a) | Warranty expense | 19,500 | ? |
| ? | Warranties payable | ? | 19,500 |
| b) | Beginning balance in warranties payable | $15,600 | ? |
| ? | Less: Warranty claims | (12,500) | ? |
| ? | Add: Warranty expense | 19,500 | ? |
| ? | Ending balance in warranties payable | $22,600 | ? |
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