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Estimated warranty liability Quantas Industries sold $325,000 of consumer electronics during July under a nine-month warranty. The cost to repair defects under the warranty is estimated at 4.5% of the sales price. On November 11, a customer was given $220 cash under terms of the warranty. Journalize the entry to record (A) the estimated warranty expense on July 31 for July sales, and (B) the November 11 cash payment.
Corporate Financial Accounting
Solutions
Corporate Financial Accounting
Estimated warranty liability
Quantas Industries sold $325,000 of consumer electronics during July under a nine-month warranty. The cost to repair defects under the warranty is estimated at 4.5% of the sales price. On November 11, a customer was given $220 cash under terms of the warranty.
Journalize the entry to record (A) the estimated warranty expense on July 31 for July sales, and (B) the November 11 cash payment.
A.
Warranty: It is an agreement made by the company to provide guarantee against the defects in the products.
To Journalize: Estimated warranty expense on July 31.
Explanation of Solution
Working note:
Calculate the amount of warranty expense as below:
B.
To Journalize: Warranty payments for the company.
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