Mason Auto Repair specializes in the repair of foreign car transmissions. To encourage business, Mason offers a 6-month warranty on all repairs. The following data available for 2019:
Transmissions repaired, 2019 6,600
Expected frequency of warranty claims 0.03 per repair
Actual warranty claims, 2019 $65,000
Estimated warranty liability, 1/1/19 $51,800
Estimated cost of each warranty claim $300
Assume that warranty claims are paid in cash.
Required:
1. Compute the warranty expense for 2019.
2. Prepare the entry to record the payment of the 2019 warranty claims.
3. Conceptual Connection: What is the December 31, 2019, balance in the estimated warranty liability account?