Answer:
1. Record the sales, warranty expense, and warranty payments for the company. Ignore cost of goods sold.
To record sales during 2018:
Dr Cash 120,000
Dr Accounts receivable 480,000
Cr Sales revenue 600,000
To record warranty liability:
Dr Warranty expense 30,000
Cr Warranty payable 30,000
To record warranty related expenses:
Dr Warranty payable 10,000
Cr Cash 10,000
Instead of cash it could have been wages payable, or repair parts inventory, but since we are not given any details, the safest thing is to assume cash payments.
2. Assume the Estimated Warranty Payable is $0 on January 1, 2018. Post the 2018 transactions to the Estimated Warranty Payable T-account. At the end of 2018 how much in Estimated Warranty Payable does the company owe?Use the T-account to determine the ending balance for the Estimated Warranty Payable account.
Ending balance of warranty payable account = $20,000
Warranty Payable
debit credit
beg. bal. 0 0
warranty liability 30,000
warranty costs 10,000
end. bal. 20,000
