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 performed warranty work and used $11,000 of parts to perform 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 work completed in June. 3. If the Estimated Warranty Liability account had a credit balance of $10,000 on May 31, what is the account balance at July 31?
What will be an ideal response?
| 1. | Warranty Expense ($450,000 * .05)………………… | 22,500 |
| ? | Estimated Warranty Liability……………………. | 22,500 |
| 2. | Estimated Warranty Liability……………………….. | 11,000 |
| ? | Parts Inventory…………………………………... | 11,000 |
| 3. | $10,000 + $22,500 - $11,000 = $21,500 |
You might also like to view...
Which of the following helps limit risk from violation of tax regulations?
A. The owner should take cash from the businesses before it is recorded as revenue. B. The owner should understate revenues and overstate deductible expenses. C. The owner should hire an accountant and a lawyer who are expert in tax issues. D. The owner should make payments to creditors by borrowing from tax money.
A distance of up to two feet, or about arm's length, around an individual is defined as:
A. close space. B. controlled space. C. adjacency. D. consensual distance. E. intimate space.
JIT is a philosophy concerned with
a. when to do something. b. how to do something. c. where to do something. d. how much of something should be done.
A firm's capital structure combines all forms of long-term financing on which the firm relies EXCEPT:
A) long-term debt. B) common equity. C) inventory. D) preferred shares.