Sea Port Company sells a product that carries a 60-day unconditional warranty against product failure. Based on statistical analysis, Sea Port knows that between the time of sale and the lapse of the warranty, 4% of the units sold will fail and require repair at an avenge cost of $40 per unit. The following data reflect the first three months during which the product was sold. October November December Units sold 30,000 36,000 60,000 Known units of product failure From sales of October 480 600 120 November 300 960 December 900 Prepare the general journal entry to record Sea Port’s estimated liability for product warranties at December 31. Assume that warranty costs of known failures have already been reflected in the records.
Sea Port Company sells a product that carries a 60-day unconditional warranty against product failure. Based on statistical analysis, Sea Port knows that between the time of sale and the lapse of the warranty, 4% of the units sold will fail and require repair at an avenge cost of $40 per unit.
The following data reflect the first three months during which the product was sold.
|
|
October |
November |
December |
|
Units sold |
30,000 |
36,000 |
60,000 |
|
Known units of product failure |
|
|
|
|
From sales of October |
480 |
600 |
120 |
|
November |
|
300 |
960 |
|
December |
|
|
900 |
Prepare the general
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